Income Tax Appellate Tribunal - Ahmedabad
Dcit, Cir. 3(2),, Ahmedabad vs M/S. Indo German Tool Room,, Ahmedabad on 14 November, 2019
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'C' अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER आयकर अपील सं./I.T.A. No. 2267/Ahd/2017 ( नधा रण वष / Assessment Year : 2014-15) DCIT, बनाम/ M/s. Indo German Tool Circle 3(2), Ahmedabad Vs. Room 5003 to 5009, GIDC, Vatva, Phase IV, Ahmedabad 382445 थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAAJ I0033P (अपीलाथ /Appellant) .. ( यथ / Respondent) अपीलाथ ओर से /Appellant by : Shri Lalit P. Jain, Sr. D.R. यथ क ओर से / Shri Chirag R. Shah, A.R. Respondent by :
सन ु वाई क तार ख / Date of 16/10/2019 Hearing घोषणा क तार ख /Date of 14/11/2019 Pronouncement आदे श/O R D E R PER PRADIP KUMAR KEDIA - AM:
The captioned appeal has been filed at the instance of the Revenue against the order of the Commissioner of Income Tax (Appeals)-3, Ahmedabad (CIT(A)' in short), dated 08.08.2017 arising in the assessment order dated 26.08.2016 passed b y the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2014-15.
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2. As per its grounds of appeal, the Revenue has assailed the action of the CIT(A) in deleting the disallowance of depreciation of Rs.2,88,35,952/-
on machineries.
3. When the matter was called for hearing, the learned DR for the Revenue relied upon the order of the AO.
4. The learned AR for the assessee, on the other hand, relied upon the order of the C IT(A). It was further pointed out that identical issue has been adjudicated in favour of the assessee in earlier assessment year vide co-ordinate bench of Tribunal in ITA Nos. 78 & 79/Ahd/2014 order dated 01.05.2017 and ITA Nos. 3335 & 3336/Ahd/2015 order dated 21.02.2018.
5. We have heard the rival submissions and perused the orders of the authorities below. The solitary issue concerns eligibilit y of depreciation of various assets amounting to Rs. 2,88,35,952/-. The claim of depreciation was disallowed b y the AO on the premise that the assessee is receiving grants from the Government of India, State Government and the German Government for the purposes of purchase of land, building, infrastructure and recurring costs. It is the case of the AO that in view of grants received, no cost has been incurred b y the assessee for its acquisition and consequentl y, acquisition cost is nil and thus, question of depreciation does not arise. The assessee on the other hand claims that it is a societ y and its promoters are Government of India, German government and Government of India. The objective of the societ y is to provide the necessary basic infrastructure to the small and medium purchase on no profit/loss basis and training basis to students through self-emplo yment courses. The respective Governments in their capacit y as promoters have contributed the capital of his societ y. Fixed assets were purchased out of capital so contributed. Appl ying common business perspective and to arrive at a true picture of the business, it is necessary that the assessee has two accounts for all the receipts including revenue contribution by the promoters in the income of the societ y and simultaneousl y deduct all incidental expenses incurred b y the societ y including depreciation allowance eligible to it to arrive at I T A N o . 2 2 6 7 / Ah d / 1 7 [ D C I T v s . M / s . I n d o G e r m a n T o o l R o o m ] A. Y . 2 0 1 4 - 1 5 - 3 -
surplus/deficit for the year on such broad facts. The CIT(A) has adjudicated the issue in favour of the assessee in following terms:
"3.2 Decision: After caref ully considering the assessment order & t he submission of the appellant I find that the facts of the case are identical to its sister unit at Indore. The three Indo German Tool Rooms wer e set up in M.P., Maharashtr a and Gujarat with identical Memorandum of Association and identical rules and regulations. For the purpose of IT. Act they are independent distinguishable entities, however, their operations are identical. The decision of Hon'ble ITAT Indore Bench in the case of Indo Ger man Tool Room, Indore is on identical facts and I do not agree with the contentions of the A.O. that in the case of Indore unit the assets have been acquired by utilizing Government Funds as well as own funds whereas in the case of the appell ant the facts are different. The contributions for various assets are being made to certain extent by the various promoting parties i.e. Government of India, Government of Germany, and Govt. of Gujarat. In addition the appellant is also earning by way of fees received from the students. The Memorandum of Association in clause-49 deals with funding of the society which includes grants made by the respective governments, donations, loans and grants, income from investments and s avings, receipt from trainees and from various other services etc. I agree with the contentions of the appellant that what has been provided by the vari ous governments are in the nature of pr omoters contribution and have been duly reflected s o in the balance sheet of the appellant. Applicability of explanation-10 to sec.43 will come into picture only when the receipts are in the for m of subsidy.
The Hon'ble IT AT whi le dealing with the case of Indo German Tool Room Indore on identical facts has deleted the disallowance of depreciation claim made by the A,0. by invoking explanation-10 of sec.43 of the I.T. Act. The Hon'ble Bench observed as under :-
"We have carefully considered the rival contentions and deliberated on the case laws cited by the Ld. Authorized Representative in the context of factual matrix of the case. In the instant case, the assessee being a society set up by the Government of India, for carrying on activity of providing technical and consultancy ser vices for small scale units. It got Government Grant towards capital funds . By utilizing these funds and its own capita/, it acquired plant and machinery and building. Whil e allowing assesses's cl aim for depreciation on such plant and machinery and building, the AO. reduced the actual cos t by the amount of gr ant after applying Explanation 10 to Section 43. Hon' ble Supreme Court in the case of P.J. Chemicals (supra) has elaborately dealt with such a situation and observed that where Government subsidy i s intended as an incentive to encourage entrepreneurs, the same is not a payment directly or Indirectly to meet any portion of the actual cost. The expression "actual cost" in Section 43(1) of the Income-tax Act. 1961, is to be interpreted liberally. Accordingly, such subsidy does not par-take all the incidents which attracts the condition for its deducibility from ''actual cost". It was , therefore, held that amount of subsidy is not liable for to be deducted from the actual cos t u/s 43(1) for the purpose of calculation of I T A N o . 2 2 6 7 / Ah d / 1 7 [ D C I T v s . M / s . I n d o G e r m a n T o o l R o o m ] A. Y . 2 0 1 4 - 1 5 - 4 -
depreciation Respectf ully following the proposition of law as laid down by the Hon'ble Supreme Court and thereafter by various courts, as narrated above, we do not find any merit in the action of the lower authorities for reducing the amount of Government grant from the actual cost of plant and machinery and building for the purpose of allowing assessee' s claim for depreciation. Accordingly we reverse the order of lower authorities and decide the issue i n favour of the assessee."
Apart from above mos t importantly recently Ahmedabad Tribunal in appellants own case has dismissed the depar tment appeal for A.Y, 2007-08 & 2008-09 on the very same depreciation iss ue by observing as under:
"8. With the assistance of the Id. OR we have gone thr ough the record carefully. Short controversy involved in these appeals is whether the contributi ons made by three governments viz. Govt. of India, Govt. of Gujar at, and German Gover nment was to be treated as a contribution on behalf of the promoters or it was to be treated as a subsidy by the Government. According to the AO, Land etc. were granted by the Govt. of Gujarat is to be treated as subsidy. which does not carr y any cost to the assesses, end therefore, i t could not clai m depr eciation. On the other hand, the Id. CIT(A) pointed out that it was rot subsidy, rather these three government s have participated for constituting a society and they have pr ovided contribution in the f orm of assets/kinds. The AO ought to have appreciated status of three Governments as of promoters and in that view it could not be construed that these governments have given grant to the assessee as a subsidy. In our opinion, the ld.AO has misconstrued whole constitution of the society. He was not justified to assume that three governments who are promoters of the society have given subsidy instead of contribution for oration of the society. Here the governments are doing business themselves by constituting the society It is not a benefit given by the government for any particular ass essee or class of assessees by exercising it s Legislative powers The ld.CIT(A) has considered this aspect and therefore allowed the claim of the assessee. After going through the order of the Id. CIT(A. we do not find any error in it. It is confirmed. Appeals of the Revenue stand dis missed.
9. In the result, the appeals of the Revenue are dismissed."
Further it is worthwhile to mention that the undersigned on t he similar issue in appellant's own case on the basis of above findings has allowed the claim of depreciation for A.Y. 2006-07, A.Y. 2012-13 & 2013-
14. Also by the Commissioner of Income Tax (Appeals )-XI in appellant's own case same ground of depreciation disallowance has been fully allowed for the A.Y.2007-08 & 2008- 09. For A.Y. 2009-10, 2010-11 & 2011-12 assess ment was done u/s 143(1).
The facts of the case of the appellant being identical respectfully following the decision of Hon'ble ITAT Indore Bench, Honorable ITAT Ahmedabad Bench and after considering t he decision of C.I .T(A)-XI for the A.Y.2007-08 & 2008-09 and undersigned for the A..Y. 2006-07, 2012- 13 & 2013-14 the A.O. is directed to delete the disallowance of the claim of depreciation made in the case of the appellant. The disallowance of I T A N o . 2 2 6 7 / Ah d / 1 7 [ D C I T v s . M / s . I n d o G e r m a n T o o l R o o m ] A. Y . 2 0 1 4 - 1 5 - 5 -
Rs.2,88,35,952/- is hereby deleted. The second ground of appeal is allowed."
As can be noticed, the C IT(A) has applied the ratio of decision rendered b y co-ordinate bench of ITAT in its own case concerning earlier assessment years. We thus see no perceptible reason to re-visit the issue alread y concluded. Hence, we decline to interfere.
6. In the result, the appeal filed b y the Revenue is dismissed.
This Order pronounced in Open Court on 14/11/2019
Sd/- Sd/-
(MAHAVIR PRASAD) (PRADIP KUMAR KEDIA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad: Dated 14/11/2019
True Copy
S. K. SINHA
आदे श क त!ल"प अ#े"षत / Copy of Order Forwarded to:-
1. राज व / Revenue
2. आवेदक / Assessee
3. संबं*धत आयकर आयु,त / Concerned CIT
4. आयकर आय,
ु त- अपील / CIT (A)
5. 0वभागीय 3त3न*ध, आयकर अपील य अ*धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड9 फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपील य अ*धकरण, अहमदाबाद ।