Soham Electroplast Pvt. Ltd., v. ITO Ward 2(1),

ITA 1578/PUN/2008 | misc
Pronouncement Date: 28-10-2010 | Result: Allowed

Appeal Details

RSA Number 157824514 RSA 2008
Assessee PAN AAECS9163P
Bench Pune
Appeal Number ITA 1578/PUN/2008
Duration Of Justice 1 year(s) 10 month(s) 16 day(s)
Appellant Soham Electroplast Pvt. Ltd.,
Respondent ITO Ward 2(1),
Appeal Type Income Tax Appeal
Pronouncement Date 28-10-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted Not Allotted
Tribunal Order Date 28-10-2010
Assessment Year misc
Appeal Filed On 12-12-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI I.C.SUDHIR JM AND SHRI D. KARUNAKARA RA O AM I.T.A. NO. 1578//PN/2008 (ASSTT. YEAR : 2005-06) SOHAM ELECTROPLAST PVT. LTD. APPELLANT GAT NO.365 TARSOD JALGAON PAN : AAECS 9163P VS. INCOME TAX OFFICER WARD 2(1) RESPONDENT JALGAON APPELLANT BY : SHRI PRAMOD SHINGTE RESPONDENT BY : SHRI ABHAY DAMLE ORDER PER I.C. SUDHIR JM IN THIS APPEAL THE ASSESSEE HAS QUESTIONED FIRST A PPELLATE ORDER ON THE GROUND THAT THE LD CIT(A) HAS ERRED IN HOLDING THAT SUBSIDY RECEIVED BY THE ASSESSEE TO SET UP UNIT IS TO BE REDUCED FROM COST OF ASSETS. 2. AT THE OUTSET OF HEARING THE LD. A.R. POINTED O UT THAT THE ISSUE RAISED IN THE GROUND IS FULLY COVERED BY THE DECISION OF PUNE BE NCH OF THE TRIBUNAL IN THE CASE OF M/S. SAPNA RE-ROLLING INDUSTRIES V/S. ITO ITA NO. 1382/PN/2006 (A.Y. 2003-04) ORDER DT. 24.12.2008. THE LD. A.R. ALSO PLACED RELI ANCE ON THE FOLLOWING DECISIONS : 1) CIT V/S. P.J. CHEMICALS LTD. (1994) 210 ITR 830 (S C) 2) SAHANEY STEEL AND PRESS WORK LTD. V/S. CIT 142 CTR (SC) 261 3) CIT V/S. K.C.A. LT.(2005) 198 CTR (BOM) 331 4) CIT V/S. STERLITE CHEMICAL (2008) 166 TAXMAN 57 (D ELHI) 5) CIT V/S. EGGRO PAPER MOULDS LTD. (2006) 152 TAXMAN 214(ALL.) 3. THE LD. D.R. ON THE OTHER HAND TRIED TO JUSTIF Y THE ORDERS OF THE LOWER AUTHORITIES. HE SUBMITTED THAT IN VIEW OF EXPLANAT ION-10 TO SECTION 43(1) OF THE ACT ITA NO. 1578/PN/2008- SOHAR ELECTROPLAST PVT. LTD. (A.Y. 2005-06) 2 ANY SUBSIDY BY WHATEVER NAME CALLED RECEIVED FROM T HE GOVERNMENT IS REQUIRED TO BE REDUCED FROM THE ACTUAL COST OF ASSETS FOR THE P URPOSE OF DEPRECIATION UNDER THE INCOME TAX ACT 1961. 4. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVAN CED BY THE PARTIES IN VIEW OF THE ORDERS OF THE LOWER AUTHORITIES MATERI AL AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. THE RELEVANT FACTS ARE THAT THE ASSESSEE COMPANY ESTABLISHED SSI UNIT IN BACKWARD AREA AND DURING THE YEAR RECE IVED SUM OF RS. 12 73 000/- UNDER PACKAGE SCHEME OF INCENTIVES 1993 FROM STATE GOVERNMENT. THE AMOUNT WAS CREDITED TO CAPITAL RESERVE A/C. THE A.O WAS O F THE VIEW THAT AS PER EXPLANATION-10 TO SECTION 43(1) OF THE ACT ANY SUB SIDY BY WHATEVER NAME CALLED RECEIVED FROM THE GOVERNMENT IS REQUIRED TO BE RED UCED FROM THE ACTUAL COST OF THE ASSETS FOR THE PURPOSE OF DEPRECIATION UNDER TH E INCOME TAX ACT 1961. THE A.O WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSES SEE AND FINALLY CONCLUDED THAT THE AMOUNT OF RS. 12 73 000/- SHOULD BE EXCLUDED FROM THE COST OF THE ASSETS FOR THE DEPRECIATION AND MADE AN ADDITION AFTER RE-WORKING THE SAME. THE LD CIT(A) HAS UPHELD THE ACTION OF THE A.O AGAINST WHICH ASSES SEE IS IN APPEAL BEFORE US. 5. AN IDENTICAL ISSUE WAS RAISED UNDER SIMILAR MATE RIAL FACTS IN THE CASE OF M/S. SAPNA RE-ROLLING INDUSTRIES V. ITO (SUPRA) WHEREIN FOLLOWING THE DECISION OF VISAKHAPATNAM BENCH OF THE TRIBUNAL IN THE CASE OF SASISRI EXTRACTIONS LTD. V. ACIT (2008) 307/(AT) 127 THE PUNE BENCH HAS COME TO THE CONCLUSION THAT THE A.O WAS NOT TO MAKE ANY ADJUSTMENT FOR THE PURPOSE OF DEPRECIATION ON ACCOUNT OF SUBSIDY IN QUESTION RECEIVED BY THE ASSESSEE. IN T HE SAID CASE OF M/S. SAPNA RE- ROLLING INDUSTRIES V. ITO (SUPRA) BEFORE THE PUNE B ENCH THE ASSESSEE WAS A REGISTERED FIRM ENGAGED IN THE MANUFACTURING OF M. S. BARS. IN THE A.Y. 2002-03 THE ASSESSEE RECEIVED AN AMOUNT OF RS. 6 50 871/- A S STATE GOVERNMENT SUBSIDY WHICH THE ASSESSEE DIRECTLY TRANSFERRED TO RESERVES & SURPLUS. THE A.O WAS HOWEVER OF THE VIEW THAT THE SUBSIDY WAS CAPITAL I N NATURE AND ACCORDINGLY THE ITA NO. 1578/PN/2008- SOHAR ELECTROPLAST PVT. LTD. (A.Y. 2005-06) 3 SAME SHOULD HAVE BEEN REDUCED FROM THE COST OF ASSE TS IN TERMS OF EXPLANATION-10 TO SEC. 43(1) OF THE ACT. THE TRIBUNAL OBSERVED TH AT SUBSIDY IN QUESTION IS NOT AN ASSET SPECIFIC SUBSIDY BUT A GENERAL SUBSIDY FOR LO CATION OF INDUSTRIAL UNIT IN BACKWARD AREAS. THE TRIBUNAL THEREAFTER FOLLOWIN G THE DECISION OF VISAKHAPATNAM BENCH OF THE TRIBUNAL IN THE CASE OF SASISRI EXTRAC TIONS LTD. V. ACIT (SUPRA) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE R ELEVANT PARA NO. 12 & 13 OF THE DECISION IN THE CASE OF SASISRI EXTRACTIONS LTD. V . ACIT (SUPRA) IS BEING REPRODUCED HERE-UNDER FOR A READY REFERENCE : 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS ION AND PERUSED THE RECORD. IN OUR CONSIDERED OPINION EVEN AFTER INSE RTION OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT THE BASIC PRINCIPLE UNDER LYING IN THE DECISION OF THE APEX COURT IN THE CASE OF P.J. CHEMICALS LTD. [1994 ] 210 ITR 830 STILL HOLDS THE FIELD. THEIR LORDSHIPS ANALYSED THE EXPRESSION MET DIRECTLY OR INDIRECTLY TO COME TO THE CONCLUSION THAT ONLY IN A CASE WHERE A SUBSIDY OR OTHER GRANT WAS GIVEN TO OFFSET THE COST OF AN ASSET SUCH PAYM ENT/GRANT WOULD FALL WITHIN THE EXPRESSION MET WHEREAS THE SUBSIDY RECEIVED M ERELY TO ACCELERATE THE INDUSTRIAL DEVELOPMENT OF THE STATE CANNOT BE CONSI DERED AS PAYMENTS MADE SPECIFICALLY TO MEET A PORTION OF THE COST OF THE A SSETS. 13. A CAREFUL PERUSAL OF TARGET 2000 SCHEME SHOWS THAT THE SCHEME WAS INTENDED TO ACCELERATE INDUSTRIAL DEVELOPMENT OF TH E STATE AND THE INCENTIVE WAS GIVEN FOR SETTING UP OF DETERMINING THE AMOUNT OF SUBSIDY TO BE GIVEN THE COST OF ELIGIBLE INVESTMENT WAS TAKEN AS THE BA SIS THOUGH IT WAS NOT SPECIFICALLY INTENDED TO SUBSIDISE THE COST OF THE CAPITAL. UNDER THE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE INCENTIV E IN THE FORM OF SUBSIDY CANNOT BE CONSIDERED AS A PAYMENT DIRECTLY OR INDIR ECTLY TO MEET ANY PORTION OF THE ACTUAL COST OF THUS T FALLS OUTSIDE THE KEN OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT. IN THE LIGHT OF THE ABOVE DISCUSS ION WE ARE OF THE VIEW THAT FOR THE PURPOSE OF COMPUTING DEPRECIATION ALLOWABLE TO THE ASSESSEE THE SUBSIDY AMOUNT CANNOT BE REDUCED FROM THE ACTUAL CO ST OF THE CAPITAL ASSET. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. WE THUS FOLLOWING THE ABOVE DECISIONS SET ASIDE ORDERS OF THE LOWER AUTHORITIES ON THE ISSUE WITH DIRECTION TO THE A.O TO DECIDE THE ISSUE IN VIEW OF THE ABOVE CITED ITA NO. 1578/PN/2008- SOHAR ELECTROPLAST PVT. LTD. (A.Y. 2005-06) 4 DECISION OF PUNE BENCH IN THE CASE OF M/S. SAPNA RE-ROLLING INDUSTRIS V/S. ITO (SUPRA). THE GROUND IS ACCORDINGLY ALLOWED IN FA VOUR OF THE ASSESSEE. 6. IN THE RESULT APPEAL IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON OCTO BER 2010 SD/- SD/- (D. KARUNAKARA RAO) (I.C.SUDHIR) ACCOUNTANT MEMBER JUDICI AL MEMBER PUNE DATED THE 28 TH OCTOBER 2010 THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 28-10- 2010 SD/- SD/- (G.S. PANNU) (I.C. SUDHIR) A.M. J.M. US COPY OF THE ORDER IS FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A)- II NASHIK 4. CIT II NASHIK 5. D.R. ITAT A BENCH 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES PUNE