Case Law Details
LG Electronics India Pvt. Ltd. vs. ACIT (ITAT Delhi)
Explanation 10 of clause (1) to section 43 of the Income Tax Act, 1961 (‘the Act’ for short) explains that where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or a State Government or any authority established under any law or by any other person, in the form of a subsidy or grant or reimbursement (by whatever name called), then, so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee. It has been, also, provided that where such subsidy or grant or reimbursement is of such nature that it cannot be directly relatable to the asset acquired, so much of the amount which bears to the total subsidy or reimbursement or grant the same proportion as such asset bears to all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee.
Recently, in an appeal before Delhi ITAT in respect of AY. 2008-09, LG Electronics India Pvt. Ltd. vs. ACIT [ITA No.2163/Del/2015, decided on 19.04.2017], briefly, the facts of the case were that a return declaring total income of Rs.337.00 crore and odd was filed by the assessee on 25.9.2008. Assessment was completed under section 143(3) read with section 144C of the Act on 27.11.2012 at a total income of Rs.654.97 crore. During the year under consideration, the assessee received, inter alia, subsidy amounting to Rs.49,38,00,503/- from the Government of Maharashtra which was treated as a capital receipt not chargeable to tax. The Assessing Officer(AO), while framing the assessment, accepted the treatment given to it by the assessee. However, the CIT, invoking jurisdiction under section 263 of the Act, came to hold that such subsidy received from the Government of Maharashtra was a revenue receipt and hence chargeable to tax. Characterizing the assessment order as erroneous and prejudicial to the interests of the Revenue, he revised the assessment order and directed the AO to include the amount of such subsidy in the total income. The assessee thereupon filed appeal before Delhi ITAT.
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