Puri Oil Mills Limited Vs ACIT/ DCIT (ITAT Delhi)
Capital Subsidy for Hydro Power Project Not to Reduce Asset Cost: Delhi ITAT Restores Full Depreciation; FA-2015 Amendment Held Prospective
Delhi ITAT, Delhi Bench ‘F’, in Puri Oil Mills Ltd. Vs ACIT/DCIT (ITA No.1681/Del/2018, AY 2014-15, order dated 19-12-2025), allowed the assessee’s appeal and deleted disallowance of depreciation of ₹72.90 lakh made by reducing capital subsidy of ₹4.86 crore from the cost of fixed assets. The Tribunal held that the subsidy received under MNRE policy for setting up Small Hydro Power (SHP) projects in Himachal Pradesh & Haryana was capital in nature, granted to encourage capacity creation and industrial development, and not intended to meet the cost of plant & machinery. Merely prescribing a mechanism for release of subsidy through banks did not convert it into asset-specific funding.
The Tribunal relied on CIT vs P.J. Chemicals Ltd. (SC) and Sasisri Extractions Ltd. (ITAT Vizag) to reiterate that even after Explanation 10 to section 43(1), subsidies meant to promote industrial growth cannot be reduced from actual cost for depreciation. It further held that section 2(24)(xviii) inserted by Finance Act, 2015 is prospective w.e.f. AY 2016-17 and cannot be applied to AY 2014-15. Consistency principle was also noted, as similar treatment was accepted in earlier scrutiny assessments. Accordingly, the Tribunal directed that the full depreciation be allowed without reducing subsidy from WDV, and allowed the appeal in favour of the assessee.
FULL TEXT OF THE ORDER OF ITAT DELHI
