2015 (10) TMI 1878

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....IT(A) erred in confirming the disallowance of Rs. 40,357, on account of depreciation." 2. Facts in brief, as emerged from the corresponding assessment order dated 19th November 2010, passed under section 143(3) of the Income Tax Act, 1961 (for short "the Act") were that the assessee firm is in the business of manufacturing and trading of sweets and namkeen. In respect of ground no.1, it was noticed by the Assessing Officer that there was a possibility of non-verification of certain expenses and also an element of personal expenses, hence, on agreed basis, he has disallowed the following expenses:- Factory cleaning expenses Rs. 20,000 Traveling expenses Rs. 10,000 Repair and maintenance Rs. 20,000 Total Rs. 50,000 ....

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....learly mentioned that the subsidy granted for the period of 15 years and this subsidy is against the assets of factory. 4.1 As above subsidy granted against the assets the value of assets shall be reduced by the amount of subsidy from the WDV of assets while calculated the depreciation. He has not deducted the subsidy from WDV and calculated depreciation. By way this he has claimed excess depreciation than admissible, hence, excess depreciation claimed by him is added to his income. The calculation of depreciation enclosed with this order as "Annexure- A" as part of this order. As per P&L A/c the assessee has claimed the depreciation of Rs. 6,43,944 and as per Annex. A the depreciation should be Rs. 6,03,587. The assessee has debit....

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....assessment order, as reproduced above, that the subsidy was granted for a period of 15 years. Due to that reason, the subsidy was mentioned as a liability in the balance sheet. If it was a liability, then the assessee was expected to re-pay the amount. If that was so, then it is not justifiable to hold that the cost of an asset was made by the amount of subsidy granted by the DIC. Even under Explanation-10, it is prescribed that where a portion of the cost of an asset acquired by the assessee has been made either directly or indirectly by any authority in the form of subsidy, then so much of the cost shall not be included in the actual cost of the asset. Therefore the basic requirement is that the cost of an asset should be made by the gran....