The Supreme Court has issued notice to the respondent, Maharashtra State Electricity Distribution Co. Ltd, in an appeal preferred by the Pr. CIT with regard to the issue of disallowance owing to the state government grants received by the assessee.
The bench of Justice Sanjiv Khanna and Justice S V N Bhatti took note that the “Additional Solicitor General appearing for the petitioner(s) has produced the order passed under Section 143(3) pursuant to order under Section 263 of the Income Tax Act, 1961. He has drawn our attention to paragraph 7 onwards of the said order, which refers to the grants received from the State Government”, while condonation of delay was granted to the revenue.
The Apex Court thus Issued notice limited to this aspect returnable in the month of January 2024.
In the impugned order of the Bombay High Court, it was observed by the division bench of Bombay High Court that “There were two issues raised by the CIT in the notice that he had issued under Section 263 of the Income Tax Act, 1961.”
“One was regarding wheeling charges of Rs.1,43,190.77/- and the other was alleged excess depreciation of Rs.41,19,74,144/-. The findings of CIT on both these issues were impugned by Respondent before the ITAT and the Appeal was allowed. Appellant is unhappy with only the finding of ITAT regarding the excess depreciation of Rs.41,19,74,144/-. In the Order dated 30th March, 2011, the CIT has observed that there was excess depreciation of Rs.41,19,74,144/- that has been allowed to Respondent by the Assessing Officer which according to CIT should not have been allowed.
According to CIT, Respondent had received contributions/grants/subsidies towards costs of the capital assets which should have been reduced from the costs of the capital assets under Section 43(1) of the Act. CIT has, in the conclusion, directed the Assessing Officer to obtain complete details of the contributions/grants/ subsidies received by Respondent towards costs of the capital assets and recompute the depreciation admissible under the Income Tax Rules by reducing such contributions/grants/subsidies from the costs of the capital assets as per the provision of Section 43(1) of the Act.”
It was observed by the Bombay High Court that, “In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.”
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