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TMI Blog2018 (7) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... e and in law, the Learned CIT(A) erred in upholding that a sum of Rs. 31,63,319 out of the aggregate capital subsidy received during the year ought to be treated as revenue receipt. 4. On the facts and circumstances of the case and in law, the Learned CIT(A) erred in upholding the reduction made to the depreciation claim by Rs. 6,70,013 arising due to adjustment of capital subsidy received from the government against the additions made during the year instead of opening WDV." 2. The brief facts of the case are that the assessee company is engaged in the business of manufacture of gear boxes coupling and standard accessories, filed its return of income for AY 2006-07 on 08-11- 2006 declaring total income at Rs. 20,76,50,964. The case was selected for scrutiny and notices u/s 143(2) and 142(1) of the Act, alongwith detailed questionnaire were issued. In response to notices, the authorized representative of the assessee appeared from time to time and filed various details, as called for. The assessment has been completed u/s 143(3) on 31-12-2009 determining the total income at Rs. 22,94,16,980 by making various additions including addition towards disallowance of stock written off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tems are in fact stock-in-trade which are used in the manufacture of final products; however, the assessee failed to produce any supporting evidence in the form of stock register, etc. Therefore, he opined that there is no error in the order of the AO to disallow stock written off of Rs. 58,62,102. The relevant portion of the order of the Ld.CIT(A) is extracted below:_ "5.1 The detailed submission of the appellant is reproduced above. It is noted that the appellant is in the business of manufacturing of gear box, coupling and standard accessories. During the course of assessment proceedings itself, it was categorically that these bevel sets are used for production process for gear box and due to "higher friction loss and lower surface finish and accuracy such items are no longer he submission makes it very clear that these items are part of production process or manufacturing as these have lost the surface finish after prolonged use. As regards the fresh submission that these are part of stock in trade no supporting evidence is produced in the form of stock register etc either before A.O or during appellate proceeding. Further, if these are part of stock in trade, then there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s year and the balance amount of Rs. 31,63,319/- is worked out as revenue receipt. 8.1 The detailed submission of the appellant is reproduced above. As discussed above, the entire subsidy has been received in this year. Therefore to say that such subsidy is in respect of earlier years without any supporting evidence is not acceptable." 5. The first issue that came up for our consideration from ground 1 is addition towards stock written off of Rs. 58,62,102. The Ld.AR for the assessee submitted that the Ld.CIT(A) failed to appreciate the facts in right perspective when the assessee has filed explanation before the AO alongwith evidences to justify that stock written off pertains to raw materials which are obsolete and unusable. The Ld.AR further submitted that the assessee has written off bevel sets consisting of bevel gears and bevel finion shafts which are used in the production process of gear box. It is further submitted that, owing to higher frictional loss under load transmission, lower surface finish and accuracy it was decided by the assessee not to use such stock any longer in the production process, and accordingly, the same being unusable was written off in the books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t any capital subsidy received during the year pertains to acquisition of capital assets for the year under consideration. According to the AO, assessee has failed to file any evidence to prove that capital subsidy received from Government of West Bengal pertains to earlier period. It is the contention of the assessee that capital subsidy received from Government of West Bengal under West Bengal Industrial Development Corporation Incentive Scheme, 2000 for expansion plan undertaken at the Kharagpur factory and the subsidy received was on account of assets already created and in terms of Explanation 10 to the Proviso to section 43(1) of the Act, the assessee duly reduced the same from its opening WDV of the respective block of assets. 8. We have heard both the parties and perused the material available on record. The assessee has reduced capital subsidy received from Government of West Bengal from opening WDV of respective block of assets, viz. plant and machinery and from the non residential building and computed depreciation accordingly. The assesee further claims that capital subsidy received from government pertains to earlier period on account of assets already created. Althou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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