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2018 (7) TMI 65 - AT - Income TaxDisallowance of stock written-off - Held that:- No doubt, stocks written off in respect of raw materials is chargeable to P&L account, but it is the duty of the assessee to prove beyond doubt before the authorities that such write off is raw materials, which are used in the production process of final products. Since the assessee has failed to produce any kind of evidence before the lower authorities, we deem it appropriate to set aside the issue to the file of the AO to consider afresh the issue in the light of claim of the assessee that stock written off pertains to raw materials. Adjustment of capital subsidy received from Government of West Bengal and re-calculation of depreciation and also treatment of excess capital subsidy received as revenue receipt - Held that:- Although assessee claims to have received capital subsidy towards assets already created in the books of account, no evidence has been filed before the AO or CIT(A) to prove that such capital subsidy has been received pertains to earlier period on assets already created. No doubt, any capital subsidy received from the government under incentive scheme is to be reduced from the assets already acquired in earlier period - issue needs to be re-examined by the AO in the light of the claim of the assessee that capital subsidy received from state government pertains to earlier period. If the AO found that such subsidy pertains to earlier period, then the AO is directed to allow deduction from opening WDV of respective block of assets. The assessee is directed to file necessary evidence to prove its claim. Insofar capital subsidy as revenue receipt, we find that the AO has wrongly treated capital subsidy received from state government as revenue receipt without appreciating the basic fact that the state government has given capital subsidy @15% of total investment made in assets. When the state government has given subsidy amount of 15% of total assets created by the assessee, there is no meaning for the AO to reduce it from the assets created during the current year to treat the balance amount as revenue receipts. Therefore, set aside this issue also to the file of the AO to cause necessary enquiries in the light of claim of the assessee that such capital subsidy pertains to earlier period. Set aside this issue also to the file of the AO to cause necessary enquiries in the light of claim of the assessee that such capital subsidy pertains to earlier period. If the AO finds that the capital subsidy received from government pertains to earlier period, then the AO is directed to allow deduction from opening WDV of the block of assets. The assessee is directed to file necessary evidence. In any case, capital subsidy cannot be treated as revenue receipt.
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