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2013 (9) TMI 398 - AT - Income TaxAllowance of Depreciation u/s 32(1) of the Income Tax Act for the assets acquired in the prior period Retrospective amendment in section 43(6) of the Income Tax Act - Assessee filed return of income on 28.11.2003 disclosing total loss of Rs.146,78,95,230/-. The assessment was framed u/s. 143(3) of the Act as the assessee has claimed depreciation of Rs.201,21,64,960/- on fixed assets comprising depreciation of Rs.194,77,57,108/- on old assets and Rs.6,44,07,852/- on assets acquired during the year under consideration. The AO while completing assessment u/s. 143(3) of the Act allowed depreciation to the extent of Rs.6,44,07,852/- in respect of those assets which were acquired during the year under consideration. But did not allow depreciation of Rs.194,77,57,108/- in respect of old assets on the ground that the required information regarding details of actual assets of written down value as on 01.04.2002 was not furnished before him Held that - The assessee has filed step wise working in the form of audit report dated 20.01.2010 given by a Chartered Accountant firm - Subsequent amendment carried out by the Finance Act, 2008 by inserting explanation (6) to section 43(6) of the Act with retrospective effect from 01.04.2003 - For calculating depreciation the AO has to consider the retrospective amendment carried out in the statute book by inserting explanation (6) to section 43(6) of the Act and to allow depreciation in accordance with law after making fresh calculation with reference to the book value of the assets following the retrospective amendment Decided in favor of Assessee. Whether subsidy on account of river dredging and maintenance should be taxed in the hands of the assessee on cash basis as is being consistently followed by assessee or on accrual basis as alleged by AO Held that - The assessee offered for taxation the amount actually paid by government year after year against the dredging subsidy in the relevant year in which such payment was actually received and the amount sanctioned by way of dredging subsidy, which was offered for taxation in the year in which such sanction was granted on receipt of audit verification from CAG - Once the assessee is consistently following a system of accounting that actually received amount is offered for taxation year after year and it is accepted in some of assessment years, revenue cannot take a different stand in other years Decided in favor of Assessee. Deduction u/s 80G of the Income Tax, for the donation made - Assessee Port Trust has made deduction of Rs. 4 crores to the Prime Minister s National Relief Fund - The assessee explained that during the FY 2004-05 relevant to AY 2005-06 the said donation was inadvertently debited to suspense account and was not transferred to P&L Account drawn for 31st March, 2005. Ld. counsel for the assessee stated that this mistake was detected in FY ending 31.03.2009 relevant to AY 2009-10 and immediately donation of Rs.4 crores was transferred to P&L Account under the head prior period charge Held that - This is an allowable claim in the year in which the payment is made. However, these are subject to verification of AO Subject to verification by A.O. will decide in which year it is allowable.
Issues Involved:
1. Allowance of depreciation on assets of Kolkata Port Trust under explanation (6) to Section 43 of the Income-tax Act, 1961. 2. Treatment of subsidy on account of river dredging and maintenance. 3. Profit on disposal of capital assets and claim of long-term capital loss. 4. Deduction in respect of donation paid to Prime Minister's National Relief Fund under Section 80G of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Allowance of Depreciation on Assets of Kolkata Port Trust: The primary issue in the appeals was regarding the allowance of depreciation on the assets of Kolkata Port Trust (KPT) under explanation (6) to Section 43 of the Income-tax Act, 1961, for the Assessment Years 2003-04, 2004-05, and 2005-06. The assessee claimed depreciation for the first time in AY 2003-04 based on its written down value (WDV) as per the audited accounts. The Assessing Officer (AO) allowed depreciation only on new assets acquired during the year but disallowed depreciation on old assets due to the lack of detailed information. The CIT(A) directed the AO to grant depreciation on the recomputed WDV of the block of assets following the provisions of Section 43(6) read with Explanation 6 thereof. The Tribunal upheld the CIT(A)'s direction and instructed the AO to accept the book value of assets as on 01.04.2002 and recompute the depreciation for subsequent years accordingly. 2. Treatment of Subsidy on Account of River Dredging and Maintenance: The second issue concerned whether the subsidy for river dredging and maintenance should be taxed on a cash basis, as consistently followed by the assessee, or on an accrual basis, as alleged by the AO. The assessee received the subsidy from the Government of India as reimbursement for actual revenue expenditure on river dredging and maintenance. The AO added the subsidy receipt to the income, but the assessee argued that the subsidy should be recognized only when there is reasonable assurance of receipt, following Accounting Standard (AS-12). The Tribunal accepted the assessee's consistent practice of offering the subsidy for taxation on a cash basis, as it was accepted in other assessment years, and directed the AO to allow the claim accordingly. 3. Profit on Disposal of Capital Assets and Claim of Long-term Capital Loss: The assessee raised grounds regarding the addition of profit on disposal of capital assets and the disallowance of long-term capital loss. However, during the hearing, the assessee chose not to prosecute these grounds and requested to withdraw them. The Tribunal permitted the withdrawal and dismissed these grounds as withdrawn. 4. Deduction in Respect of Donation Paid to Prime Minister's National Relief Fund: The assessee claimed a deduction of Rs. 4 crores paid to the Prime Minister's National Relief Fund under Section 80G of the Act. The donation was inadvertently debited to the suspense account and not transferred to the Profit & Loss Account for the relevant year. The CIT(A) did not admit the claim as it was not made before the AO nor through a revised return. The Tribunal, considering the Supreme Court's decisions in Goetze India Ltd. and National Thermal Power Corporation Ltd., remitted the issue back to the AO for verification and decision on the allowable deduction. Conclusion: The Tribunal allowed the assessee's appeals partly, directing the AO to recompute depreciation based on the book value of assets and to allow the subsidy claim on a cash basis. The issue of the donation deduction was remitted back to the AO for verification. The revenue's appeals were dismissed.
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