Case Law Details
ACIT Vs Inox Air Products Private Limited (ITAT Pune)
The only issue raised in the assessee’s appeal is against the direction of the ld. CIT(A) for reducing the amount of subsidy from the value of assets for the purpose of granting depreciation.
From Explanation 10 to section 43(1) of the Act it is immensely clear that the same is triggered where a portion of cost of an asset has been paid directly or indirectly by the Central Government etc., in the form of a subsidy or grant. It has no application where the object of the scheme under which the subsidy is granted is to accelerate industrial development. The proviso to Explanation 10, which has been held to be applicable by the ld. CIT(A), also talks of “such subsidy”, which again traces its origin to the main part of the Explanation 10 that, in turn, refers to meeting cost of an asset directly or indirectly by the Government etc. Au contraire, where the subsidy is given for industrial development and not for meeting cost of an asset by the Government etc., the same cannot be brought within the purview of Explanation 10. The Hon’ble Bombay High court in Pr. CIT Vs. M/s. Welspun Steel Ltd. (2019) 264 Taxman 252 (Bom.) has taken similar view in deciding question no. (b) raised before it and held that the Tribunal was justified in holding that subsidy cannot be considered as a payment directly or indirectly to meet any portion of the actual cost. The assessee in that case also got subsidy for industrial development. Similar view has also been taken by the Pune Benches of the Tribunal in M/s. Alkoplus Producers Pvt. Ltd. and Another Vs. DCIT and Another (2019) 177 ITD 150 (Pune-Tribunal). In backdrop of the above, it is overt that subsidy, in the prevailing circumstances, does not qualify for reduction from the cost of assets in pursuance of Explanation 10 to section 43(1) of the Act.
Now with the amendments in sections 145A and 145B for section 145A and in Section 2(24), subsidy falls within the definition of `income’ u/s 2(24) and resultantly chargeable to tax in the year of receipt as per section 145B(3) in all cases except where Explanation 10 to section 43(1) gets magnetized, in which eventuality, it will go to reduce the cost of assets. The contention of the ld. DR about either the reduction of the amount of subsidy from the cost of assets in terms of the Explanation 10 or treating it as chargeable to tax will gain relevance in the periods covered by the afore discussed amendments. Since such amendments are not applicable to the year under consideration, the case will be governed by the ratio decidendi in the judicial precedents discussed supra. In view of the foregoing discussion, we are satisfied that the ld. CIT(A) was not justified in directing to exclude the amount of subsidy allowed to the assessee by the States of Jharkhand and Maharashtra from the cost of assets for the purposes of allowing depreciation.
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