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2018 (8) TMI 1780

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..... nds - HELD THAT:- The assessee had treated the Government grants as promoter's contribution and credited to Capital Reserve account and treated as part of shareholders' funds. Whatever be the correctness of such accounting treatment, the assessee had made the full disclosure about the treatment given to such subsidy and the reason therefore. During the course of assessment proceedings also, this aspect had further come to the notice of the AO. Thus not only there was sufficient disclosure in the return filed by the assessee with respect to the entry in question, this was also noticed by the AO during the scrutiny assessment. If therefore, the Assessing Officer had any doubt or dispute about the manner in which the assessee treated such subs .....

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..... reasonable assurance that (i) the company will comply with the conditions attached to them, and (ii) the grant/subsidy will be received. When the grant or subsidy related to revenue, it is recognized as income on a systematic basis in the statement of profit and loss over the period necessary to match them with the related costs, which they are intended to compensate. Where the grant relates to an asset, it is recognized as deferred income and release to Income In equal amounts over the expected useful life of the related asset. Where the company received nonmonetary grants, the asset is accounted for on the basis of Its acquisition cost. In case a nonmonetary asset is given of cost, it is recognized at a nominal value. Government .....

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..... the Companies Act which, interalia, states that P&L account shall disclose every material feature including credits or receipts and debits or expenses in respect of non recurring transactions or transactions of exceptional nature. Thus, in view of provisions of section 115JB, the receipt of ₹ 9,17,86,000/was required to be added while computing income u/s. 115JB of the Act which the assessee company failed to do. 5. So, in view of the above discussion, I have reason to believe that the income to the tune of ₹ 9,17,86,000/directly credited to capital reserve account in the balance sheet chargeable to tax u/s. 115JB has escaped from assessment due to failure on the part of the assessee to disclose fully and truly all material .....

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..... ssessee was taken in scrutiny. After such scrutiny assessment, impugned notice has been issued beyond a period of four years from the end of relevant assessment year. The question of failure on part of the assessee to disclose truly and fully all material facts therefore, becomes relevant. The Assessing Officer's main objection to the treatment given by the assessee to subsidy of 9.17 crores was that such amount was directly credited to Capital Reserve account by the assessee which resulted into non consideration of such amount for computation of assessee's book profit. According to him, such treatment was not in consonance with the accounting treatment such receipt should have met. However, in the reasons recorded itself, he referr .....

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