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2016 (5) TMI 159 - ITAT DELHIRevision u/s 263 - taxability of incentive/subsidy - whether the assessee was entitled for deduction of sales tax subsidy as capital receipt and Assessing Officer had rightly allowed? - Held that:- Facts on record do not inspire credence with the angle that the Assessing Officer has conducted a proper inquiry before accepting the claim of assessee. It gives an impression that some piecemeal facts were placed on record, which have neither been considered and nor came to the notice of the Assessing Officer. In any case, it is not discernible that the Assessing Officer had applied his mind analytically and logically and thereafter he took one of the possible view. We further hold that CIT in his elaborate, lucid and eloquent order has pointed out vital flaws in the orders of assessment and has observed that there was no application of mind during the assessment proceedings on the issue of taxability of sales tax exemption. We entirely agree with the discussion in the order of the learned CIT. The Commissioner has not decided the issue on merit. He has remitted it to the file of the Assessing Officer for a fresh inquiry. In view of the above discussion, we do not deal into the arguments of merit in respect of claim of the assessee with the observation that same shall dealt in the appeal arising against the consequent assessment and thus, the grounds raised challenging the action u/s 263 of the Act on the issue of sales tax exemption/subsidy are dismissed. Difference under the head provision for “gratuity” between outstanding as per balance sheet and audit report - Held that:- Assessment order was erroneous and prejudicial to the interest of revenue in respect of omission to make an admitted disallowance of ₹ 88 lacs on account of provision for gratuity u/s 40A(7) read with section 43B of the Act. Thus action u/s 263 revising an order of assessment is held to be in accordance with law. Claim of additional deprecation on computer software - Held that:- It is held that here too there was no enquiry on the part of the AO in respect of claim of additional depreciation and therefore the CIT was justified to conclude that AO failed to carry out necessary and proper enquiry in respect of claim made by the appellant company. Even before us the learned counsel for the assessee has not placed on record any evidence in the shape of reply so as to show and establish that the issue was duly examined by the Assessing officer. The reply dated 12.7.2010 before the AO as highlighted, is a general reply and does not in any manner show that necessary and proper enquiries were made viz-a-viz the claim of the appellant. Mere disclosure in the return of income or the financial statements above does not show or demonstrate that there was due application of mind by the AO. On the contrary complete explanation alongwith invoices had been placed on record for the first time during the revision proceedings and not in the assessment proceeding and thus the assessment order is both erroneous and prejudicial to interest of revenue. Hence, even on this issue the claim of the appellant is not maintainable. Addition of sale tax subsidy - held to be trading receipt as against capital receipt claimed by the appellant company - Held that:- It is pertinent to state here that that prior to the year under consideration, the assessee used to treat the Central Sales Tax exemption amount as part of trading receipt in its books of accounts and for the purpose of computing income as per income tax, the assessee used to reduce the amount of CST exemption amount along-with Entry Tax and Electricity Duty exemption amount out of the income of the company at the stage of computation of profit and gains of the business treating the same as capital receipt not taxable but in the year under consideration, the assessee company changed the treatment of benefit of Central Sales Tax (CST) exemption in books of account. Thus rather than reducing such benefit from the profit and gain of the business, the assessee at the end of the previous year transferred the amount of sales tax benefit from the sales account to reserve and surplus account, holding the same as capital receipt not taxable. In the notes to account to the Annual Report, the assessee stated that this new treatment was to meet the compliance of Accounting Standard (AS-12) prescribed for Government Grants. But in respect of similar benefit of Entry tax exemption (Rs.17,28,48,148/-) and electricity duty exemption (Rs. 31,10,88,789/-) the Accounting Standard (AS-12) was not followed and those amount were reduced out of the profit and gain of business at the stage of computation of income only. In the year under consideration, total amount of both exemptions of the Entry Tax and the Electricity Duty of ₹ 48,39,36,937/- was reduced out of profit of the business at the stage of computation of income by the assessee, Thus we hold that the change in treatment alone cannot be a ground to contend that a sum otherwise taxable as income is not taxable or is a capital receipt and therefore following the aforesaid orders of the Tribunal in the case of assessee itself (supra), we sustain the addition made by the Assessing Officer and confirmed by the CIT(A) and grounds raised by the assessee are dismissed. Disallowance of additional depreciation claimed in respect of computer software ‘Primavera' - Held that:- It is apparent that installation of computers in the office cannot be made a basis to deny the claim of deprecation provided such office can on facts be taken as an “industrial premises” for the purpose of depreciation. In the instant case the finding of fact recorded both by CIT(A) and AO is that “primavera” is not actually installed within any manufacturing machinery and is a web based tool for top management for review etc. and planner/scheduler. It is a tool like any other office equipment which helps assessee’s top management to manage project in a better way. It is not part of plant and machinery which is used in the process of manufacturing. Having regard to the above we do not find any merit in the claim of assessee and hence the grounds of the assessee are dismissed. Addition on account of provision for gratuity - Held that:- From the facts mentioned above, we find that the sum of ₹ 1,37,41,850/- disallowed by the AO under section43B of the Act consist of two items. The first is the disallowance of Rs, 88,00,001/- admitted by the assessee as gratuity amount transferred to general reserve and was not offered in the return of income or in the original assessment under section 143 (3) of the Act. The 2nd item is a provision of gratuity of ₹ 49,41,850/-. So far as sum of ₹ 49,41,850/- is concerned the same has already been disallowed u/s 40A(7) of the Act by the assessee and as such any further disallowance u/s 43B of the Act is absolutely unjustified and untenable. Accordingly, the disallowance made of ₹ 49,41,850/- is thus deleted and grounds raised are allowed.
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