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2023 (9) TMI 837 - ITAT DELHI
Addition on account of undervaluation of stock - since freight 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 - HELD THAT:- Any adjustment in the closing stock requires simultaneous adjustment in the subsequent opening stock. Thus, the entire exercise becomes tax neutral. Having said that, we find that the assessee has been consistently following the same method of valuation of closing stock, which has been accepted by the revenue in the earlier assessment years.
We find no reason for deviating from the same. The assessee has never included freight charges while valuing its closing stock. Therefore, we do not find any reason for doing the same during the year under consideration. The findings of the ld. CIT(A) are set aside and the AO is directed to delete the addition - Thus, ground is allowed.
Addition 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 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 AO.
However, during the year, AO 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 granted for meeting cost of any asset but for larger public interest of industrial development of the State of Punjab.
As decided in P.J. Chemicals Ltd. [1994 (9) TMI 1 - SUPREME COURT] Government subsidy, it is not unreasonable to say, is an incentive not for the specific purpose of meeting a portion of the cost of the assets, though quantified as or geared to a percentage of such cost. If that be so, it does not partake of the character of a payment intended either directly or indirectly to meet the "actual cost".
It would not be out of place to mention that even if the action of the Assessing Officer has to be accepted, then the same should have been taken in A.Y 1999-2000. However, we find that no action has been taken from A.Y 1999-2000 to A.Y 2006-07. Therefore, there being no change in the facts, it would be incorrect to take a different stand after a gap of 10 years - Decided in favour of assessee.