IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, F: NEW DELHI BEFORE VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER [Assessment Year: 2014-15]

Puri Oil Mills Limited, The ACIT/ DCIT, 302, Jyoti Shikhar, Janak Puri, Circle 20(1), New Delhi- 110058. Vs IP Estate, Room no. 219, New Delhi.

PAN- AAACP3653M Assessee Revenue Assessee by Shri S.K. Vatta, CA Revenue by Ms. Harpreet Kaur Hansra, Sr. DR Date of Hearing 24.09.2025 Date of Pronouncement 19.12.2025

ORDER

PER BRAJESH KUMAR SINGH, AM, This appeal by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals)-7, New Delhi, dated 05.01.2018 [hereinafter referred to as the ‘Ld. CIT(A)’] arising out of the assessment order dated 26.12.2016 order passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the DCIT, Circle- 20(1), New Delhi, (hereinafter referred to as the ‘Ld. AO’) pertaining to A.Y. 2014-15.

2. Brief facts of the case: the assessee-company e-filed its return of income for AY 2014-15 on 29.11.2014 declaring a total income of Rs.5,45,26,882/-. The case was selected for scrutiny under CASS and a statutory notice u/s 143(2) was issued on 28.08.2015. On perusal of the balance sheet, it was noticed by the AO that the assessee had received capital subsidy of Rs.4,86,00,000/-, which was capitalised in the books. The AO observed that under Section 5 of the Act, all income received or accrued was taxable unless specifically exempt. The Assessing Officer also took note of the fact that capital subsidies were held to be not taxable subject to reduction of the same from ‘actual cost’ of assets in case of depreciable assets. The Assessing Officer also referred to a fact of insertion of sub-clause (xviii) in section 2(24) of the Act, by the Finance Act 2015 w.e.f. 01.04.2016 providing for an exclusive definition of the expression ‘Income’ under the taxing laws. The Assessing Officer noted that the assessee had received a subsidy of Rs. 4,86,00,000/- as financial support for setting up a 1.40 MW Small Hydro Power (SHP) Project from the Government of Himachal Pradesh and Haryana. Further, the AO observed that the assessee neither treated the subsidy as revenue income nor reduced the cost of depreciable assets as per the law laid down by the Hon’ble Supreme Court. The assessee was accordingly asked to justify why the capital subsidy should not be reduced from the cost of the assets. In response, the assessee submitted its reply vide letter dated 25.11.2016 (extract reproduced in assessment order) that:

“In pursuance to the query in respect of capital subsidy receivable as per Financial Statements, the assessee company wishes further to submit in continuation of our earlier submissions on record vide para 3 of our submission dated 25" October, 2016, which for the purpose is reproduces as under:

1. That out of the total capital subsidy of Rs.2.43 crore receivable as appearing in the comparative figures shown in the previous financial year columns, the sum of Rs 1.28 crore was received during the year, thus resulting the Capital subsidy receivable as appearing as on 31.03:2014 to Rs.1.15 crore which has been received also in the next year, Except as explained above, there is no other revenue effect on the financial statements. The said capital subsidy is in respect of Hydro Projects set up in Haryana and H. P. as per Ministry of New & Renewal Energy (MNRE] Govt. of India as Policy guidelines to encourage setting up such Hydro Power Projects in the States, 2. That in respect of the same, your kind attention is also drawn to the submissions and disclosure in para 18 (d)(iiii) of the Form 3CD Statement of Particulars, annexed to the Audit Report u/s 44AB of the Act) for the year ended 31.03.2014 wherein the assessee Auditor have already stated as under:

The assessee is of the view that the Capital subsidy received for setting of Hydro Power Units have not been reduced from the cos