Appeal partially allowed on depreciation disallowance due to subsidy treatment as liability. Fresh assessment ordered.

The Tribunal partially allowed the appeal, sending back the issue of disallowance of depreciation due to a subsidy for re-examination by the Assessing Officer. The Tribunal raised concerns about the treatment of the subsidy as a liability and instructed a fresh assessment considering all aspects. The decision was made on 20.8.2015.

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Issues:
1. Addition of expenses for cleaning, traveling, and repair/maintenance.
2. Disallowance of depreciation due to subsidy received.

Analysis:

Issue 1: Addition of Expenses
The appeal was filed by the assessee against the order confirming the addition of Rs. 50,000 for cleaning, traveling, and repair/maintenance expenses. The Assessing Officer disallowed these expenses due to the possibility of non-verification and personal expenses. The CIT(A) affirmed the addition as the appellant did not press this ground. The Tribunal dismissed ground no.1 as the assessee had agreed to the addition earlier.

Issue 2: Disallowance of Depreciation
Regarding the disallowance of Rs. 40,357 in depreciation, the Assessing Officer recalculated depreciation due to a subsidy of Rs. 4,58,320 received from DIC, Government of Maharashtra. The subsidy was shown as a liability in the balance sheet, granted for 15 years against factory assets. The Assessing Officer added the excess depreciation claimed by the assessee to their income. The CIT(A) upheld this action citing Explanation-10 to section 43(1) of the Act.

Judgment
The Tribunal noted that the subsidy was mentioned as a liability to be repaid after 15 years, raising doubts on whether it should affect the asset's cost. The Assessing Officer did not thoroughly examine the subsidy's terms and repayment clauses. In the interest of natural justice, the Tribunal decided to send the issue back to the Assessing Officer for re-examination. The ground was restored for denovo consideration, allowing the appeal partly for statistical purposes. The decision was pronounced on 20.8.2015.

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