TMI Blog2023 (9) TMI 837X X X X Extracts X X X X X X X X Extracts X X X X ..... tion on account of subsidy - AO held that the aforesaid capital subsidy ought to have been reduced to from the actual cost of fixed asset in terms of Explanation 10 to section 43(1) and with this belief, AO computed the excess depreciation by reducing the actual cost by capital subsidy in the F.Y 1998 99 and adjusted in the WDV of each A.Y till the A.Y under consideration - HELD THAT:- It is strange to find that the Assessing Officer has taken such a view for the year under consideration. Though the Assessing Officer has revisited the WDV of the A.Y after 1999 2000, till the A.Y under consideration, yet, he chose not to take any action for any A.Y. earlier to the present A.Y. There is no dispute that subsidy was sanctioned for promoting of growth in industry in the State of Punjab under the policy in new unit which has come into commercial production on 01.10.1992, shall be eligible to claim incentive computed on the basis of Fixed Capital Incentive made by such a unit in land, building and plant and machinery. The quantum of incentive so receivable was dependent on the value of fixed capital investment made in the specified area(s) of the state. The said incentive was tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight expenses have separately been debited to the profit and loss account, but not included in the valuation of closing stock, the assessee has undervalued its closing stock. Taking freight charges into consideration, the Assessing Officer computed the undervaluation of closing stock for salt at Rs. 1,44,177/ and for rice Rs. 3,75,671/ , making addition of Rs. 5, 19, 848/ . 4. The ld. CIT(A) confirmed the addition following its order for A.Y 2007 08. 5. Before us, the ld. counsel for the assessee vehemently stated that the assessee has been consistently following the system of valuing the stock of traded goods at cost or market price, whichever is lower by following FIFO method. 6. It is the say of the ld. counsel that the method of valuation of closing stock is regularly and consistently followed by the assessee and accepted by the department. Therefore, there is no reason for making the impugned addition. 7. The ld. DR strongly supported the findings of the Assessing Officer /CITA. 8. We have carefully perused the orders of the authorities below. At the very outset, we have to state that any adjustment in the closing stock requires simultaneous adjustment in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unjab under the policy in new unit which has come into commercial production on 01.10.1992, shall be eligible to claim incentive computed on the basis of Fixed Capital Incentive made by such a unit in land, building and plant and machinery. The quantum of incentive so receivable was dependent on the value of fixed capital investment made in the specified area(s) of the state. 15. This policy was introduced for promoting growth of industry in the State and s ince the assessee satisfied all the conditions for being eligible, it received subsidy of Rs. 50 lakhs during the financial year 1998-99. The said incentive was taken to the capital reserve account and was claimed as non-taxable in the return of income for assessment year 1999-00, treating the same as capital receipt. The same was accepted by the Assessing Officer. 16. However, during the year, the Assessing Officer has taken a position that since it has been given a part of capital investment, cost of assets needs to be reduced as per Explanation 10 to section 43(1) of the Act. We are of the considered view that the said section is not applicable on the facts of the case in hand in as much as the subsidy has not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 10,10,59,625, from the State Government in relation to the same. The subsidy was quantified with respect to Sales Tax payable by the assessee. The assessee's contention was that subsidy was not linked to any capital asset and accordingly, the same should not be reduced from the cost of asset for the purpose of granting depreciation. The assessing officer, however, held that the amount of subsidy is liable to be reduced from the cost of the machinery for the purposes of computing depreciation thereon. The CIT(A) reversed the decision of the assessing officer and observed that the assessee received sales tax incentives for establishing windmill, which is an alternative source of energy. Such subsidy was an incentive for encouraging development of non-traditional source of energy and not for simply meeting the cost of acquisition of windmills. While holding as above, the CIT(A) relied upon the decision of the apex Court in the case of P.J. Chemicals Ltd. (supra). The Tribunal dismissed the appeal filed by the Revenue and observed that the assessee's case was not hit by the insertion of explanation 10 to sec.43(1) and the same is covered by the decision of Supreme Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire amount of capital gain V. Because the Ld. CIT(A) has erred in facts for deleting the addition of Rs. 1.38.65.250/- made on account of disallowance of depreciation on Edible Oil Brand despite that on the demerger proceedings. the assessee company M/s ABCL as well as M/s ACL has reduced its tax liability and given arrangement a 'coularble device' as shown capital gain. VI Because the Ld. CIT(A) has erred in law and facts for deleting the addition of Rs. 57.85.000/- made on account of disallowance of Royalty paid on brand Gagan despite that the demerger process is not according with the provisions of section 2( 19AA) of the Income Tax Act. 1961. VII Because the Ld. CIT(A) has erred in law and facts for deleting the addition of Rs. 57.85.000/- made on account of disallowance of Royalty paid on brand Gagan despite that as per provisions of Explanation of Section 43(1) of the Income tax Act. 1961. the actual cost of acquisition of the Edible Oil Brand is NIL as such no depreciation is available to the assessee company on the same. VIII Because of the Ld. CIT(A) has erred in law and facts for deleting the addition of Rs. 25.00.000/- made on ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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