Case Law Details
Brief of the Case
ITAT Mumbai held In the case of M/s. UniDeritend Limited vs. ACIT that the subsidy being provided to the assessee to encourage the setting up of wind mill to promote generation of energy through non conventional sources, thus, is to be treated as capital receipt. With regard to applicability of the section 41(1) is concerned, it relates to the benefit derived by an assessee in respect of loss, expenditure or trading liability and not in respect of capital receipts. So far as the Explanation 10 to Section 43(1) is concerned, as per the policy of the government, the subsidy is not given automatically on the acquisition of asset or for the purpose of acquisition of asset. The precondition is that the assessee must install a wind power project and that the wind power plant must be successfully operated with a minimum 12% plant load factor for at least one year. So the mere acquisition of the asset was not sufficient to claim subsidy. Hence, the grant of subsidy in this case is of such a nature that it cannot be directly relatable to the asset acquired. Also, in this case neither there was a transfer of any asset from the block nor did the block has ceased to exist, so no capital gain liability u/s 50. Accordingly, the subsidy received by the assessee is not taxable under section 41(1) neither under 43(1) and nor under section 50.
Facts of the Case
During the financial year 2001-02 the assessee had installed wind energy project at a cost of Rs.1189.87 lakhs. As per the policy of Maharashtra Government, to promote generation of energy through non conventional sources to supplement the ever increasing demand of the electricity in the state, the wind power projects have been granted status of small scale industries and the state government gives the capital subsidy up to 30% of the fixed capital investment to the promoters subject to a condition that wind power plant has successfully operated with a minimum 12% plant load factor for at least one year. The assessee accordingly applied for the said capital subsidy which was granted to the assessee during the relevant financial year 2007-08 at Rs.20 lakh. During the subsequent year i.e. F.Y. 2008-09, assessee had to refund back subsidy to the extent of Rs.10 lakhs.
The AO observed that the assessee had already claimed 100% depreciation on the windmill, and as such the subsidy was required to be reduced from the cost of asset and hence the assessee had received a benefit of Rs.10 lakh. He accordingly added the said sum into the income of the assessee. The AO further observed that even otherwise the written Down Value (WDV) of the asset was nil, hence subsidy was to be taxed as short term capital gains under section 50.
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contention of the assesse is related to another discussion. Kindly check.