TaxTMI 
TaxTMI 
2013 (9) TMI 398
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.... appeals viz., ITA Nos. 375 to 379/K/2010 and I.T.A No. 1041/Kol/2007 (by assessee) and ITA Nos. 98 & 99/K/2012 (by revenue), either assessments framed u/s. 143(3) of the Act or rectification carried out u/s. 154 of the Act or order u/s. 143(3) r.w.s. 251 of the Act are under challenge, is as regards to allowance of depreciation on the assets of Kolkata Port Trust (in short KPT) under explanation (6) to Section 43 of the Act in respect of Assessment Years 2003-04, 2004-05 and 2005-06. For this, assessee as well as revenue has raised common ground in all the appeals against the disallowance/allowance of depreciation claimed by assessee, and for the sake of brevity, we reproduce the following relevant ground from ITA No. 1041/K/2007: "1. For that the CIT(A) erred in not allowing the depreciation claimed by the appellant on the assets acquired prior to April 1, 2002. The reasons given by the CIT(A) for not allowing such claim for depreciation are erroneous both on facts and in law and cannot be sustained." 3. Brief background of the dispute and facts are that the assessee is a Port Trust governed by Major Port Trusts Act, 1963 is a local authority within the meaning....
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.... AO u/s. 154 of the Act, this issue emerges in these appeals. Now before us assessee argued that till the FY ending 31.03.2002 relevant to AY 2002-03, the assessee was totally exempt and assessee did not file any income tax returns for and up to AY 2002-03. The first year in which assessee filed its return of income was 2003-04 and thereafter it was continuously filing returns of income year after year. The assessee claimed that along with the return of income for AY 2003-04, which was accompanied with its audited accounts for FY 2002-03 as well as tax audit report in Form No. 3CD prepared in accordance with the requirements of section 44AB of the Act. The assessee claimed depreciation for the first time in an aggregate of Rs.201,21,64,960/- based on its WDV worked out in accordance with the provisions of sub sections (1) and (6) of Section 43 of the act on the book value of the assets. Assessee claimed that assessee, a Port Trust, all along was never assessed to income tax up to AY 2002-03 but prepared its accounts and carried forward the assets and WDV of the assets in terms of accounting standard and hence, claimed depreciation for AY 2003-04 in respect of all its assets held as....
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....2003; vi. Applying the provisions of Section 43(6)(c) of the Income Tax Act, 1961, ascertain the WDV of the block of Assets entitled for depreciation for Assessment Year 2004-05; vii Quantify the total depreciation allowable for Assessment Year 2004-05, inclusive of the depreciation allowed by the Assessing Officer; viii. Allow the above said total depreciation for Assessment Year 2004-05 in place of the depreciation already allowed by the Assessing Officer in the computation of the Income from Business of the Appellant; ix. Determine the WDV of the Block of Assets (inclusive of the old assets) as on 31.03.2004 / 01.04.2004 relevant for Assessment Year 2005-06." 5. During the pendency of proceedings in view of direction of CIT(A) for AY 2004-05, the AO in respect of AY 2003-04 initiated proceedings u/s. 154 of the Act vide letter bearing No. Cir-35/Kol/154/08-09/71 dated 12.05.2008 and the following are the observation of the AO in the notice: "Consequent upon amendment by insertion of Explanation 6 in the Section 43(6) of the Income Tax Act, retrospectively from 01.04.2003 i.e. A. Y. 2003-04, the de....
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....s maintained for all its assets and also filed necessary details and clarification as were asked for by the authorities. 8. As regards to the allegation of revenue that the pollution control equipments claimed to have been installed at jetty and jetty itself, is not in existence or value described in assessee's accounts is incorrect. On this charge the Bench required the assets to be verified despite a certificate filed by Chartered Engineer certified as under: "Prabir Datta, Consultant Chartered Mechanical Engineer To Whom It May Concern This is to certify that: i) I had inspected the Dust Control Arrangement, installed at the Coal handling Plant, Haldia Dock Complex, Kolkata Port Trust. This is a Dust Collector Syste3m to control Air Pollution in and around the working area. ii) I had inspected the Pollution Control Arrangement, installed at the 2nd Oil jetty, Haldia Dock Complex, Kolkata Port Trust. It is a Mechanically Skimmed Oil and Grease removal system to control the Riverine Water Pollution.  ....
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....Y 2004-05 himself had given direction to the AO to allow depreciation in accordance with the amendment carried out by Parliament by inserting explanation (6) to section 43(6) of the Act with retrospective effect from 01.04.2003. We are of the view that 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. The assessee has already filed the detailed statement which have been checked and verified by the auditors and also the AO could have very well checked the same. Now the retrospective amendment w.e.f. 01.04.2003 of section 43(6) of the Act whereby explanation (6) has been inserted thereto and as per explanation (6) the total amount of depreciation on such assets, provided in the books of account of the assessee in respect of such previous year or preceding previous year relevant to Assessment Year under consideration shall be deemed to be the depreciation actually allowed under this Act for the purposes o....
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....ntly, the subsidy was increased to 100% in terms of letter No. PR-15021/5/92-PG dated 02.02.1994 w.e.f. FY 1992-93. The assessee's claim is that it is clear from this letter that subsidy was granted by way of reimbursement of revenue expenditure and not by way of meeting the capital cost of the fixed assets owned and employed by assessee Trust in relation to various operations. The AO during the course of assessment proceedings drew attention of the assessee towards the report of Principal Director of Audit, Central, who stated that the assessee has under stated the income by Rs.11120.09 lacs because of accounting treatment in respect of Central Govt. accounts towards river dredging and maintenance payments. The assessee explained vide letter dated 20.09.2005 as under: "The Principle Director of Audit Central has stated that income was understated by Rs.11,120.09 lakhs. This is mainly because of accounting treatment in respect of Central Governments grant towards river dredging and maintenance. It is true that KoPT's claim as per accounts was Rs.33,571.60 lakhs. Out of the said amount KoPT received Rs.20,000 lakhs during the financial year 2002-03. KoPT has followed....
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....s final order there on and the Board shall be bound to give effect to such orders. Reply of the Board of KoPT has already been sent to the Central Government. The Central Government has not passed any order in respect of financial year 2002-03." 12. The AO has not accepted the explanation of the assessee and added the subsidy receipt on account of river dredging and maintenance reimbursement charges. The assessee before CIT(A) as well as before us now explained the difference pointed out by Principal Director of Audit, Central stating that income was understated by assessee by Rs.11120.09 lacs. It was explained that it was mainly because of accounting treatment in respect of Central Govt. subsidy towards river dredging and maintenance. It was explained by assessee's counsel that assessee claimed the total at Rs.33571.60 lacs and out of this assessee received a sum of Rs.20000 lacs towards FY 2002-03 relevant to AY 2003-04. Assessee's counsel explained that it is following AS-12 (Accounting Standards) issued by Institute of Chartered Accountants of India and as per AS-12 Govt. grants should not recognize until there is reasonable assurance that - (i) the enterpris....
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....7-08, 2008- 09 and 2009-10. For this, he filed copies of assessment orders passed u/s. 143(3) of the Act in respect to above assessment years. The assessee filed annexure stating the amount claimed and amount sanctioned in view of the subsidy on account of river dredging and maintenance which is as under: Bill No. & Date Amount claimed (Rs) Letter ref for release of fund Amount sanctioned (Rs) Accounting Treatment F.Y-2002-03 FIN/204/B dated 09/06/03 314.76 crores PO-28011/1/2002-SBD 26/06/2002-Rs80 cr. 30/12/2002-Rs 20 cr. 31/03/2003-Rs100 cr. 200 crores At the time of raising bill Debtors A/c Dr To claim of cost for dredging and river maint. At the of receipt of subsidy Claim of cost for river dredging and river maint. Dr To Income F.Y 2004-05 FIN/247/B dated 15/06/05 291.41 crores PO-28011/1/2002-SBD 08/10/2004-Rs.22 cr + 100 cr on account of F.Y.2003-04 31/03/2005-Rs70.44 cr + 69.56 cr on account of F.Y. 2003-04 92.44 crores on account of F.Y. 2004-05 + 169.56 crores on account of F.Y. 2003-04 At the time of raising bill Debtors A/c Dr To claim of cost for dredging and river maint. At time of receipt of subsidy ....
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.... be withdrawn and are dismissed as withdrawn. 16 The next issue raised in ITA No.378/Kol/2010 vide ground nos. 1, 2 and 3 is as regards to deduction in respect to donation paid to Prime Minister's National Relief Fund claimed u/s. 80G of the Act. The relevant three grounds read as under: "1. That on facts as well as on law, the Learned CIT(Appeal) has erred in not directing the A.O to allow deduction under section 80G of the Income Tax Act in respect of donation of Rs. 4 crores paid to Prime Ministers National Relief Fund, which was not claimed in the return of income due to absence of Gross Total Income ¡n the return. 2. That on, facts as well as on law, the Learned CIT(Appeal) has erred in not considering the fact that the deduction under section 80G could not be claimed in the return of income or revised return of income due to absence of Gross Total Income in the return of income. 3. That on facts as well as on law, the Learned CIT(Appeal) has erred in holding that in absence of claim in the original return of income and in absence of revised return of income for such claim and also for not raising the claim before the Le....