Asstt. CIT v. Central Madhya Pradesh Gramin Bank
[ITA No. 135/Jab/2018, dt. 10-12-2020] : 2020 TaxPub(DT) 5176 (Jab-Trib)
Application of Explanation 10 to section 43(1) on capital
support received from Govt. of India to maintain capital adequacy
Facts:
Assessee a Regional Rural Bank (RRB) was in receipt of a
capital support of Rs. 20 crores to augment its CRAR ratio (Capital to risk
weighted assets ratio). Consequential to the infusion of capital it was found
that the assessee had invested in computers etc. substantially. It was the case
of the assessing officer that Explanation 10 to section 43(1) be applied on the
capital receipt and hence they should go to reduce the investment made in
computers as bereft this capital contribution assessee could not have made such
a large investment in computers. Explanation 10 uses the word directly and
indirectly so no matter even if the money was given for capital augmentation it
goes to indirectly subsume the character of a subsidy to fall in the scope of
Explanation 10 to section 43(1). On appeal the Commissioner (Appeals) reversed
the views of the assessing officer. On higher appeal --
Held in favour of the assessee/against the revenue that the
receipt of capital from Government to augment CRAR cannot be read as subsidy to
fall in the scope of Explanation 10 to section 43(1). They were eligible for
depreciation on computers on the amount defrayed in toto.
The ITAT read the following points worth noting --
1. The word
"indirectly" in Explanation 10 to section 43(1) has to be read "ejusdem
generis" or on "noscitur a sociis" whereby anything
akin to subsidy related to the asset alone can be adjusted.
2. Indirectly is used in
Explanation 10 to section 43(1) so to not to expand its meaning but if a
subsidy is granted to meet cost of fixed assets without identifying the asset
then it would fit in the meaning of indirectly and not remote receipts.
3. The receipt of capital and
the defraying of computers are two transactions with no relativity. Just
because the entity could have spent the capital received into computers it
would not mean that the very same capital contributed as a subsidy to fund the
cost of computers. Such a reading was incorrect.