TMI Blog2013 (9) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... amendment carried out by the Finance Act, 2008 by inserting explanation (6) to section 43(6) of the Act with retrospective effect from 01.04.2003 - For calculating depreciation the AO has to consider the retrospective amendment carried out in the statute book by inserting explanation (6) to section 43(6) of the Act and to allow depreciation in accordance with law after making fresh calculation with reference to the book value of the assets following the retrospective amendment – Decided in favor of Assessee. Whether subsidy on account of river dredging and maintenance should be taxed in the hands of the assessee on cash basis as is being consistently followed by assessee or on accrual basis as alleged by AO – Held that:- The assessee offered for taxation the amount actually paid by government year after year against the dredging subsidy in the relevant year in which such payment was actually received and the amount sanctioned by way of dredging subsidy, which was offered for taxation in the year in which such sanction was granted on receipt of audit verification from CAG - Once the assessee is consistently following a system of accounting that actually received amount is offere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act in respect of Assessment Years 2003-04, 2004-05 and 2005-06. For this, assessee as well as revenue has raised common ground in all the appeals against the disallowance/allowance of depreciation claimed by assessee, and for the sake of brevity, we reproduce the following relevant ground from ITA No. 1041/K/2007: 1. For that the CIT(A) erred in not allowing the depreciation claimed by the appellant on the assets acquired prior to April 1, 2002. The reasons given by the CIT(A) for not allowing such claim for depreciation are erroneous both on facts and in law and cannot be sustained. 3. Brief background of the dispute and facts are that the assessee is a Port Trust governed by Major Port Trusts Act, 1963 is a local authority within the meaning of section 3(31) of the General Clauses Act, 1987. Upto AY 2002-03 assessee Port Trusts was enjoying total exemption from income tax in respect of all its income otherwise chargeable to Income tax under the other heads. By Finance Act, 2002 w.e.f. 01.04.2003 an explanation was inserted u/s. 10(20) of the Act whereby a definition of local authority was added in the statute book for the purpose of said section 10(20) of the Act. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long with the return of income for AY 2003-04, which was accompanied with its audited accounts for FY 2002-03 as well as tax audit report in Form No. 3CD prepared in accordance with the requirements of section 44AB of the Act. The assessee claimed depreciation for the first time in an aggregate of Rs.201,21,64,960/- based on its WDV worked out in accordance with the provisions of sub sections (1) and (6) of Section 43 of the act on the book value of the assets. Assessee claimed that assessee, a Port Trust, all along was never assessed to income tax up to AY 2002-03 but prepared its accounts and carried forward the assets and WDV of the assets in terms of accounting standard and hence, claimed depreciation for AY 2003-04 in respect of all its assets held as on 01.04.2002 based upon original cost each of its depreciable assets. The revenue s case, on the other hand, is that depreciation for and from AY 2003-04 should be allowed only with reference to WDV as on 01.04.2002 which WDV should be worked out after deducting from actual cost of the respective depreciable assets, the depreciation on notional basis, which would have been allowed to it in each of the earlier years if the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income from Business of the Appellant; ix. Determine the WDV of the Block of Assets (inclusive of the old assets) as on 31.03.2004 / 01.04.2004 relevant for Assessment Year 2005-06. 5. During the pendency of proceedings in view of direction of CIT(A) for AY 2004-05, the AO in respect of AY 2003-04 initiated proceedings u/s. 154 of the Act vide letter bearing No. Cir-35/Kol/154/08-09/71 dated 12.05.2008 and the following are the observation of the AO in the notice: Consequent upon amendment by insertion of Explanation 6 in the Section 43(6) of the Income Tax Act, retrospectively from 01.04.2003 i.e. A. Y. 2003-04, the depreciation claimed by you, would become a mistake apparent from record, and the same requires to be recomputed from A. Y. 2003-04 and subsequent A. Y. s in view of absence of detailed information regarding acquisition of various old assets and total amount of depreciation on such assets provided in the books of account. As such you are requested to furnish the detailed calculation of the depreciation claimed for the relevant A. Y.s vis-a-vis their date and cost of acquisition, depreciation provided in respect of each asset / block of assets in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m It May Concern This is to certify that: i) I had inspected the Dust Control Arrangement, installed at the Coal handling Plant, Haldia Dock Complex, Kolkata Port Trust. This is a Dust Collector Syste3m to control Air Pollution in and around the working area. ii) I had inspected the Pollution Control Arrangement, installed at the 2nd Oil jetty, Haldia Dock Complex, Kolkata Port Trust. It is a Mechanically Skimmed Oil and Grease removal system to control the Riverine Water Pollution. Both the above systems are Pollution Control measures adopted by Haldia Dock Complex, Kolkata Port Trust. We personally inspected the site of Port Trust at Haldia, and found that the Pollution Control System is installed i.e. Dust Control arrangements which collect dust to control air pollution in and around the working area. We further inspected the jetty where waste oil from the ship is transported and pollutant parts are removed and pollution control arrangement is installed on second oil jetty at Halida Dock Complex. It is a mechanically skimmed oil and grease removal system to control the riverine water pollution. Hence, there is no dispute that there is no asset in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also the AO could have very well checked the same. Now the retrospective amendment w.e.f. 01.04.2003 of section 43(6) of the Act whereby explanation (6) has been inserted thereto and as per explanation (6) the total amount of depreciation on such assets, provided in the books of account of the assessee in respect of such previous year or preceding previous year relevant to Assessment Year under consideration shall be deemed to be the depreciation actually allowed under this Act for the purposes of this clause. Hence, the depreciation allowed for the Assessment Years 2003-04, 2004-05 and 2005-06 on assets acquired prior to 01.04.2002 and in use on that date need to be computed following the amended provisions. Hence, we direct the AO to accept the book value of assets as on 01.04.2002 and recompute the depreciation as on 31.03.2003, 31.03.2004 and 31.03.2005 on all assets acquired prior to 01.04.2002 and in use on that date on the written down value of the assets as per books of account of assessee as on 01.04.2002. Hence, this issue is decided in favour of the assessee and against the revenue. This issue in all these appeals is answered accordingly. 10. The second issue in these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents. The assessee explained vide letter dated 20.09.2005 as under: The Principle Director of Audit Central has stated that income was understated by Rs.11,120.09 lakhs. This is mainly because of accounting treatment in respect of Central Governments grant towards river dredging and maintenance. It is true that KoPT s claim as per accounts was Rs.33,571.60 lakhs. Out of the said amount KoPT received Rs.20,000 lakhs during the financial year 2002-03. KoPT has followed Accounting Standard (AS-12) issued to Para 13 of AS-12 Government s grants should not be recognized until there is reasonable assurance that - (i) the enterprise will comply with the conditions attached to them (ii) the grants will be received. Claim made by KoPT for subsidy towards river dredging and maintenance is entertained by the Government after it is verified and passed by the audit. In such audit claims made by KoPT may be reduced by the auditors because of various disallowances. In view of the same until there is reasonable assurance regarding physical realisation of dredging subsidy from the Government, it is not prudent to recognize the entire claim as income of KoPT. Reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the total at Rs.33571.60 lacs and out of this assessee received a sum of Rs.20000 lacs towards FY 2002-03 relevant to AY 2003-04. Assessee s counsel explained that it is following AS-12 (Accounting Standards) issued by Institute of Chartered Accountants of India and as per AS-12 Govt. grants should not recognize until there is reasonable assurance that - (i) the enterprise will comply with the conditions attached to them (ii) the grants will be received as stipulated. The assessee explained that claim as made by assessee for subsidy towards river dredging and maintenance which is entertained by government after it is verified and passed by Govt. auditor. According to him, during audit claim made by assessee may be reduced by the auditors because of various disallowances. According to him, unless there is reasonable assurance regarding physical realisation of dredging subsidy from Government it is not prudent or correct to recognise the entire claim as income. He explained that the reasonable assurance can also be verified from the budget allocation of the Ministry for the purpose of recognition of subsidy as income. He explained that there was budget allocation of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me F.Y 2004-05 FIN/247/B dated 15/06/05 291.41 crores PO-28011/1/2002-SBD 08/10/2004-Rs.22 cr + 100 cr on account of F.Y.2003-04 31/03/2005-Rs70.44 cr + 69.56 cr on account of F.Y. 2003-04 92.44 crores on account of F.Y. 2004-05 + 169.56 crores on account of F.Y. 2003-04 At the time of raising bill Debtors A/c Dr To claim of cost for dredging and river maint. At time of receipt of subsidy Claim of cost for river dredging and river maint. Dr To Income 13. From the above facts and circumstances it is clearly indicated by the assessee Port Trust as to how the dredging subsidy has been offered for taxation year after year. Since the dredging subsidy towards reimbursement of dredging expenses claimed to have been incurred by the assessee was not accepted as claimed year after year and sanctioned in each year was granted long after close of the relevant financial year. Even there is curtailment in the amount and a too far lower amount was granted. The assessee offered for taxation the amount actually paid by government year after year against the dredging subsidy in the relevant year in which such payment was actually received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed in the return of income or revised return of income due to absence of Gross Total Income in the return of income. 3. That on facts as well as on law, the Learned CIT(Appeal) has erred in holding that in absence of claim in the original return of income and in absence of revised return of income for such claim and also for not raising the claim before the Learned A.O in the course of assessment the claim for deduction under section 80G is liable to be rejected. 17. We have heard rival submissions and gone through facts and circumstances of the case. We find that the assessee Port Trust has made deduction of Rs. 4 crores to the Prime Minister s National Relief Fund by cheque no. 478168 dated 13.12.2004 drawn on Indian Overseas Bank, New Delhi i.e. for the FY ending 31.03.2005 corresponding to AY 2005-06. The assessee explained that during the FY 2004-05 relevant to AY 2005-06 the said donation was inadvertently debited to suspense account and was not transferred to P L Account drawn for 31st March, 2005. Ld. counsel for the assessee stated that this mistake was detected in FY ending 31.03.2009 relevant to AY 2009-10 and immediately donation of Rs.4 crores was transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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