NEZONE TUBES LTD.,KOLKATA vs. DCIT, CIR-3, KOLKATA, KOLKATA

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ITA 1349/KOL/2015Status: DisposedITAT Kolkata20 September 2017AY 2006-073 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the capital subsidy received under the West Bengal Incentive Schemes could not be reduced from the cost of assets for the purpose of allowing depreciation. This decision followed a coordinate bench ruling on a similar issue.

What were the facts?

The assessee received a capital investment subsidy from the West Bengal government. The Assessing Officer treated this subsidy as revenue and added it to the total income. The CIT(A) held the subsidy to be a capital receipt but directed its reduction from the cost of assets for depreciation purposes.

What were the issues?

Whether capital subsidy received under state government incentive schemes should be reduced from the cost of assets for depreciation calculation.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA BENCH ‘d’, KOLKATA

Before: Shri P.M. Jagtap, AM & Shri S.S. Viswanethra Ravi, JM]

order

: September 20, 2017 ORDER

Per P.M. Jagtap, AM

1.

This appeal filed by the assessee is directed against the order of Ld. CIT (Appeals) – 5, Kolkata dated 26.08.2015 and in the solitary ground raised

therein, the assessee has challenged the action of the Ld. CIT (a) in directing the AO to reduce the amount of capital subsidy received under West Bengal Govt. Incentive Schemes amounting to Rs. 14,25,000/- from the cost of assets for the purpose of allowing depreciation.

2. The assessee in the present case is a company which is engaged in the business of manufacturing of ERW MS Black, Galvanised Tubes and Steel Tape. The return of income for the year under consideration was filed by it on 17.10.2006 declaring a total income of Rs. Assessment Year: 2006 -07 M/s. Nezone Tubes Ltd. 1,69,88,324/- During the year under consideration, a sum of Rs. 14,25,000/- was received by the assessee as capital investment subsidy from WBIDC and the same was claimed to be exempt from tax being in the nature of capital receipt. In the assessment completed u/s 143(3) vide an order dated 31.07.2008, the said receipt was treated by the AO as revenue in nature and the amount of Rs. 14,25,000/- was added by him to the total income of the assessee.

3. Against the order passed by the AO under section 143(3), an appeal was preferred by the assessee before the Ld. CIT (A) and after considering the submissions made by the assessee as well as the relevant case laws on the issue, the Ld. CIT (A) allowed the claim of the assessee that the capital investment subsidy received by the assessee from WBIDC was a capital receipt not chargeable to tax. He however held that the said amount was liable to be reduced from the cost of the concerned assets for the purpose of computing depreciation allowable to the assessee. Aggrieved by the order of the Ld. CIT (A), the assessee has preferred this appeal before the Tribunal.

4. We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the issue involved in this appeal of the assessee is squarely covered in favour of the assessee by the decision of the Coordinate Bench of this Tribunal rendered in the case of Bhagwati Sponge Pvt. Ltd vs DCIT vide its order dated 08.07.2016 passed in & 1646/K/2014 wherein it was held, after considering the objects of the

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