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TMI Blog2022 (2) TMI 1277X X X X Extracts X X X X X X X X Extracts X X X X ..... as against Rs. 81,48,93,308/- claimed by the assessee. 3. Brief facts relating to the issue are that the Assessing Officer (A.O.) observed that in schedule 4 to the Balance Sheet as on 31.03.2008, the assessee company had reserves comprising the following deferred government grants, subsidies and contributions: Particulars RESERVES As on 31.03.2008 Rs. in lakh Government Grants Subsidies Susidies towards cost of capital assets 7637.86 Grant towards cost of Capital Assets 224.88 Consumer Contributions Consumer Contributions 2308.68 Consumer contributions towards capital Assets 13573.85 Total 23745.27 Therefore, the A.O. asked the assessee to explain the nature of Government's Grants- Capital and why only 10% of this has been written back and shown as income of Rs. 2382.99 lakh under the head 'Other income' in the schedule -20 to the audited profit and loss account. The A.O. also asked the assessee to explain the nature of Consumers' contributions and why only 10% of this had been back as income of Rs. 256.52 lakh under the head 'Other income' in the schedule -20 to the audited profit and loss account. The assessee submitted be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rival contentions and perused the material on record. Through this ground assessee has challenged the order of ld. CIT(A) sustaining the disallowance of depreciation at Rs.10,84,81,976/- by observing that capital subsidy and grant received are to be reduced from fixed asset and depreciation to be allowed on the remaining balance. We observe that the Government gives grant/subsidy to the holding company and then it is allocated to the assessee which is one of the subsidiary company and further such subsidy are not granted to actually to meet the cost but are granted as an inclusive of rural economically backward unviable areas. Assessee received subsidies on different schemes viz. Rural Electrification and Tribal area Electrification and the assets cannot be bifurcated into Rural/Tribal area etc. 17.1 There is no dispute to the fact that the grants received from the Government are capital in nature but they have not been given specifically for acquiring a particular asset. In such situation provision of section 43(1) Explanation 10 of the Act squarely applies for the treatment of such capital grant. Relevant provisions of section 43(1) of the Act read as under :- 43. In sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has been met directly or indirectly by the Central Government or State Govt. or any Authority established under any law, or by any other person, in the form of subsidy or grant or reimbursement then in a case where the subsidy is directly relatable to the asset, such subsidy shall not be included in the actual cost of the assets. In a case, where such subsidy or Grant or reimbursement, is of such nature that, it cannot be directly relatable to any particular assets, so much of the amount which bears to the total subsidy or reimbursement or Grant the same proportion as such asset bears to all the assets in respect of which or with reference to which such grant or subsidy or reimbursement is received shall no be included in the actual cost of that assets to the assessee. 4.3 In view of the clear provisions of the Act as stated supra and the assessee himself have admitted that the subsidy and grant received are towards Capital assets, the assessee should have reduced the same from the Capital asset to arrive at the actual cost. However the assessee has failed to do so and also not furnished the details of fixed assets in respect of which the subsidy and grants have been received. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al purposes. 5. Ld. D.R. fairly agreed with the same. 5.2 In view of the above, since the Ld. CIT(A) has followed the order of the Ld. CIT(A) in the case of the assessee for assessment year 2006-07 while treating the entire capital subsidy grant and consumers contribution as capital in nature thus reducing the cost of capital asset and as a consequence the claim of depreciation thereon, and which issue has been restored back to the A.O. by the ITAT with the direction to determine the proportionate amount of grant relating to each asset, the said decision will apply to the present case also following which the issue in the present case also is restored back to the A.O. to be decided in accordance with the direction of the ITAT in assessment year 2006-07. 6. Ground no. 1 is allowed for statistical purposes. 7. Ground no. 2 reads as under: 2.0 The learned Commissioner of Income Tax (Appeals) has erred in law and facts in confirming the disallowance of Rs/ 1,26,000/- under the head small & low value items written off. 8. Brief facts relating to the issue are that the A.O. noted that the assessee had claimed Rs. 1,26,000/-towards small and low value items written off under the he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound assessee is aggrieved that ld. CIT(A)'s decision for sustaining the addition of Rs.1,08,030/- being balance of small and low value items. As submitted by ld. AR that the amount of Rs.1,08,030/- mainly includes small and low value items including calculators, mobile phones etc. which is practically difficult for keeping control. Looking to the overall business exposures of the company and from the perspective of business and practical approach we are of the view that expenditure is relating to carrying on and conducting of the business which has not been disputed by the Revenue, therefore, the assessee needs to be allowed the claim of expenditure of Rs.1,08,030/- being value of small and low value items. This ground of assessee is allowed. 10. Ld. D.R. fairly agreed with the same. 10.1 In view of the same since identical issue stands adjudicated in favour of the assessee in assessment year 2006-07, the issue stands covered by the said order of the ITAT. Accordingly, the claim of the assessee to small and low value item written off amounting to Rs. 1,26,000/- is allowed. 10.3 Ground no. 2 is allowed. 11. Ground no. 3 reads as under: 3.0 The learned Commissioner of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Difference is occurred due to change of mode of measurement i.e., material received' in MT while issued as per no. of bags as well as in piecemeal etc. - Due to physical properties of material. - Transaction of breakable items damaged during handling. - Inter-changing of quantitative value at the time of issue due to same shape, size, etc. 1.3 Accordingly such losses on account of shortage, pilferage of stock is written off after approval of the competent authority. The assessee, therefore, prays that the additions made on this count may be deleted. 1.4 The assessee also invites your honour's kind attention to the fact that the similar issue has been decided by the Hon'ble Commissioner (Appeals) in the favour of assessee in case of Gujarat Energy Transmission Corp. Ltd. (GETCO). a sister concern of the assessee, for the Asst. Year 2006-07 and 2007-08. The copy of the CIT(A)'s order passed in case of GETCO for the Asst. Year 2007-08. (Refer Annexure-l). 14. He further pointed out that location-wise details of write off was also filed. Our attention was drawn to page 7 of the paper book containing the details as under: Code Account Head flame of Locat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of any such material, we do not find any good reason to interfere with the order of the CIT(A) on this issue, which is hereby confirmed and the ground of appeal of the Revenue is dismissed. 16. In Assessment Year 2009-10 also in ITA No. 633/Ahd/2013 order dated 05.09.2019 our attention was drawn to the relevant findings at page 69 as under: 4. Ground No.2 The revenue has also challenged the deletion of disallowance of loss of material through pilferage, shortage etc. to the tune of Rs.2,36,35,000/-. 5. At the very onset of the proceeding, the Learned AR relied upon the judgment passed by the Co-ordinate Bench in ITA No.761/Ahd/2012 in assessee's own case for A.Y. 2008-09 whereby and whereunder the identical issue has been decided in favour of the assessee. A copy whereof has also been submitted before us. The Learned DR, however, failed to raise any serious objection to such contentions made by the Learned AR. 6. Heard the respective parties, perused the relevant materials available on record and also the judgment passed by the Co-ordinate Bench in ITA No.761/Ahd/2012 for A.Y. 2008-09. The relevant portion of dealing with the identical issue is as follows: "37. The groun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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