Subsidy not to be reduced from Actual Cost of Fixed Assets u/s 43(1) for purpose of Calculation of Depreciation: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Pune has ruled that, Subsidy is not to be reduced from the actual cost of fixed assets under Section 43(1) for purpose of calculation of depreciation.

The appellant company, Atharva Polymers Private Limited, is engaged in the business of manufacturing all kinds of plastic materials of injection molding for automobiles, home appliances (Refrigerator) parts, industry styrene, polystyrene, etc. The appellant company filed its return of income on 22.11.2014 declaring a total income of Rs.61,64,790/-. The case was selected for scrutiny and the assessment was framed under section 143(3) of the Act at the income of Rs.66,78,940/-.

In the assessment order, the Assessing Officer (AO) disallowed Rs.1,93,452/-, which was employees’ contribution to the Provident Fund, which was deposited by the assessee after the due date mentioned in the EPF Act but before the due date mentioned under section 139(1) of the Income Tax Act. The AO also observed that the assessee received Rs.43,25,000/- subsidy from Govt. of Maharashtra. AO took the view that the said amount has been received by the assessee as Capital subsidy, and the Assessing Officer made proportionate disallowance of Rs.2,72,696/- as the wrong claim of depreciation. AO also added a Dividend income of Rs.48,000/-.

Being aggrieved, the assessee filed an appeal before the CIT(A). Before the CIT(A), despite several opportunities for hearing, none appeared on behalf of the assessee, therefore, under the circumstances, CIT(A) adjudicated the appeal on the materials available on record i.e., Grounds of Appeal, Statement of Fats, Assessment Order and Submissions on record. After perusal of the records of the assessee and the assessment order, the CIT(A) confirmed the order passed by the Assessing Officer. Being aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal.

 The Bench consisting of S S Godara, Judicial Member, and Dr. Dipak P Ripote, Accountant Member observed that Subsidy shall not be reduced from the actual cost of fixed assets u/s 43(1) for the purpose of calculation of depreciation, and the AO is directed to delete the addition of depreciation.”

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