M/s Agro Plast, Tiptur v. ITO, Tiptur

ITA 198/BANG/2010 | 2000-2001
Pronouncement Date: 31-05-2010 | Result: Allowed

Appeal Details

RSA Number 19821114 RSA 2010
Bench Bangalore
Appeal Number ITA 198/BANG/2010
Duration Of Justice 3 month(s) 6 day(s)
Appellant M/s Agro Plast, Tiptur
Respondent ITO, Tiptur
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 31-05-2010
Date Of Final Hearing 31-05-2010
Next Hearing Date 31-05-2010
Assessment Year 2000-2001
Appeal Filed On 22-02-2010
Judgment Text
ITA.198 & 199/B/2010 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'B' BANGALORE BEFORE DR. O. K. NARAYANAN VICE PRESIDENT AND SHRI. P. MADHAVI DEVI JUDICIAL MEMBER I.T.A NO.198 & 199/BANG/2010 (ASSESSMENT YEARS : 2000-01 & 2001-02) M/S. AGRO PLAST S. K. P. T. ROAD TIPTUR .. APPELLANT V. INCOME-TAX OFFICER WARD - 1 TIPTUR .. RESPONDENT APPELLANT BY : SHRI. MANOJ D. PUKALE ADVOCATE RESPONDENT BY : SHRI. D. R. JANARDHAN ADDL. COMMI SSIONER OF INCOME-TAX O R D E R PER DR. O. K. NARAYANAN VICE PRESIDENT : THESE TWO APPEALS ARE DIRECTED AGAINST THE COMMON O RDER OF THE COMMISSIONER OF INCOME-TAX(A)-II AT BANGALORE DATE D 27.11.2009 AND ARISE OUT OF THE ASSESSMENTS COMPLETED U/S.143( 3) R.W.S.147 OF THE IT ACT 1961. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUF ACTURE AND SALE OF DRIP-IRRIGATION SYSTEMS. THE MANUFACTURING UNIT OF THE ASSESSEE WAS ESTABLISHED IN A NOTIFIED BACKWARD DISTRICT IN THE STATE OF KARNATAKA. ITA.198 & 199/B/2010 PAGE - 2 AS THE UNIT SET UP BY THE ASSESSEE HAS SATISFIED AL L THE PRESCRIBED CONDITIONS THE GOVERNMENT OF KARNATAKA HAS DISBURS ED INVESTMENT SUBSIDY TO THE ASSESSEE. THE ASSESSEE TREATED THE INVESTMENT SUBSIDY RECEIVED FROM THE GOVERNMENT OF KARNATAKA AS CAPITA L RECEIPT NOT CALLING FOR ANY TAX TREATMENT. BUT THE ASSESSING O FFICER HELD THAT THE SUBSIDIES WERE RELEASED BY THE STATE GOVERNMENT AGA INST SPECIFIC INVESTMENTS MADE BY THE ASSESSEE AND THEREFORE TH E COST OF THE ASSETS MUST BE REDUCED BY THE AMOUNTS OF SUBSIDY RECEIVED AND ACCORDINGLY THE ASSESSEE WOULD BE ENTITLED FOR DEPRECIATION ON SUCH REDUCED COST OF ASSETS ACQUIRED FOR THE PURPOSE OF THE NEW INVESTME NT UNIT. ACCORDINGLY THE ASSESSING OFFICER REDUCED THE COST OF ASSETS BY THE AMOUNT OF CAPITAL SUBSIDIES RECEIVED BY THE ASSESSE E AND GRANTED DEPRECIATION ALLOWANCE ON THE REDUCED COST. THIS P OSITION WAS CONFIRMED IN FIRST APPEALS AND THEREFORE THE SECO ND APPEALS BEFORE THE TRIBUNAL. 3. WE CONSIDERED THE MATTER IN DETAIL. A SIMILAR I SSUE WAS CONSIDERED BY ITAT PANAJI BENCH IN THE CASE OF M/S .JAYASHREE CONSTRUCTION CO. V. ACIT IN ITA NO.214/PNJ/07 DAT ED 22.12.2008 FOR THE ASSESSMENT YEAR2003-04. THE SAID INDUSTRIA L UNIT ALSO SITUATED IN THE STATE OF KARNATAKA AND RECEIVED INDUSTRIAL S UBSIDY FROM THE STATE GOVERNMENT JUST LIKE IN THE CASE OF THE ASSES SEE BEFORE US. THE ITA.198 & 199/B/2010 PAGE - 3 TERMS AND CONDITIONS OF THE SUBSIDIES DISBURSED BY THE STATE GOVERNMENT IN THE CASE OF M/S. JAYASHREE CONSTRUCTI ON CO. WERE EXACTLY THE SAME BASED ON WHICH SUBSIDIES HAVE BEE N DISBURSED TO THE ASSESSEE BEFORE US. 4. THE TRIBUNAL IN THE SAID CASE RELYING ON THE JUD GEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONER O F INCOME-TAX V. P. J. CHEMICALS (230 ITR 830 HELD THAT THE SUBSIDI ES WERE NOT RELEASED BY THE GOVERNMENT OF KARNATAKA TO MEET ANY PORTION OF THE ACTUAL COST OF ANY ASSET BUT ON THE OTHER HAND TH E SUBSIDIES WERE DISBURSED AS AN INCENTIVE TO THE ENTREPRENEURS TO SET UP INDUSTRIES IN NOTIFIED BACKWARD AREAS. THE TRIBUNAL ACCORDINGLY HELD THAT THE SUBSIDIES NEED NOT BE REDUCED FROM COST OF ASSETS F OR THE PURPOSE OF COMPUTING THE QUANTUM OF DEPRECIATION ALLOWANCE. 5. WE FIND THAT THE SAID ORDER OF THE TRIBUNAL IS E QUALLY APPLICABLE TO THE PRESENT CASE AS WELL. THE ASSESSEE HAS PLAC ED A COPY OF THE SUBSIDY SANCTION ORDER DATED 5.2.1998 BEFORE US AT THE TIME OF HEARING. EVEN THOUGH THE ELIGIBLE AMOUNT OF SUBSIDY AT 25% I S COMPUTED ON THE BASIS OF THE TOTAL INVESTMENTS MADE BY THE ASSESSEE THE SUBSIDY WAS REALLY MEANT FOR ENCOURAGING ENTREPRENEURS IN ESTAB LISHING INDUSTRIAL UNITS IN NOTIFIED BACKWARD AREAS OF THE STATE. IT IS ONLY FOR THE PURPOSE ITA.198 & 199/B/2010 PAGE - 4 OF COMPUTING THE ELIGIBLE AMOUNT OF INDUSTRIAL SUBS IDY THAT THE TOTAL INVESTMENTS MADE BY THE ASSESSEE ARE TAKEN INTO CON SIDERATION. THIS IS ONLY A MODE OF COMPUTATION. THIS IS NOT THE PURPOS E. THE REAL PURPOSE OF THE SUBSIDY IS IN THE NATURE OF INCENTI VE TO ESTABLISH THE INDUSTRIES. AS ALREADY STATED THEREFORE IN THE L IGHT OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF P. J. CHEM ICALS (210 ITR 830) WE FIND THAT THE CLAIM OF THE ASSESSEE IS LEG ITIMATE AND THERE IS NO NEED TO DEDUCT THE SUBSIDY AMOUNT FROM THE COST OF THE ASSETS ACQUIRED BY THE ASSESSEE. ACCORDINGLY THE ASSESSE E IS ENTITLED FOR DEPRECIATION ALLOWANCE ON THE GROSS AMOUNT OF THE C OST OF ACQUISITION OF ASSETS. THE ASSESSING AUTHORITY IS THEREFORE DIRECTED TO RECOMPUTE DEPRECIATION ALLOWANCE IN FAVOUR OF THE ASSESSEE. 5. IN RESULT THESE TWO APPEALS FILED BY THE ASSESS EE ARE ALLOWED. ORDER PRONOUNCED ON MONDAY THE 31ST DAY OF MAY 20 10 AT BANGALORE. SD/- SD/- (P. MADHAVI DEVI) (DR. O. K. NARAYANAN) JUDICIAL MEMBER VICE PRESIDENT MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF ITAT NEW DELHI 7. GF ITAT BANGALORE