TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 1143
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.... Act') relating to the Assessment Year 2020-21. 2. The assessee has raised the following Grounds of Appeal: 1. The PCIT has erred in laws and facts by passing an order u/s. 263 on the issue which was not covered in the notice of hearing as issued to the Assessee, resulting into breach of principle of natural justice and mandate of Section 263 of the Act, as the issue discussed in notice was transaction of AY 2017-18, whereas order u/s. 263 has been passed for transactions of AY 2020-21. 2. The PCIT has erred in laws and facts by passing an order u/s. 263 relying on Explanation 2 to Section 263, which was not covered in the notice of hearing as issued to the Assessee, resulting into breach of principle of natural justice....
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....ts had been amortised and offered as income and submitted that accounting treatment should be respected. 4. The Principal Commissioner examined the assessee's submissions and the assessment records and observed that after the Finance Act, 2015 amended the definition of "income" and Explanation 10 to section 43(1) and with ICDS-VII in force, Government Grants related to depreciable assets must either be added to income or must reduce the actual cost/WDV of the asset for income-tax purposes. The Principal Commissioner noted that the assessee had an opening grant balance of Rs. 105.46 crore and received further grants during the year of Rs. 7.59 crore, of which only Rs. 3.87 crore (about 3.4% of total grants) had been amortised while the ba....
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....income or should have reduced the asset cost, and therefore the AO had not applied his mind to this issue. Having considered the matter, the Principal Commissioner held that the correct way to deal with the treatment for the year under consideration was to add the grant received in the year (Rs. 7.59 crore) to the income for tax purposes while allowing a reduction for any amount of that same grant already amortised and offered as income; alternatively, the AO should reduce the actual cost/WDV of the block of assets by the grant as provided in Explanation 10 to section 43(1) and ICDS-VII and then compute depreciation accordingly. Because the AO had neither added the grant to income nor adjusted depreciation or WDV, the assessment order was h....
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....nditions is fulfilled in the case of the assessee. The counsel for the assessee submitted that in the relevant year the assessee had only amortised a proportionate amount of the deferred government grant received in earlier years and credited the same to its profit and loss account, offering it for taxation. The method followed was consistent with the accounting treatment adopted in the earlier years. The assessee submitted that the government grant of Rs. 11,96,95,913 was received in financial year 2016-17 and did not pertain to financial year 2019-20, and therefore had no bearing on the taxable income of A.Y. 2020-21. It was submitted that making any addition in the impugned year would amount to double taxation of income that has already ....
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....placed reliance on the observations made by order passed u/s. 263 of the Act. 7. We have heard the rival contentions and perused the material on record. We note at the outset that the controversy involved in the present appeal is squarely covered against the assessee by the decision of this Tribunal in the case of M/s. S.P. Chips Potato Pvt. Ltd. v. DCIT, ITA No. 548/Ahd/2019, order dated 29.06.2022. In that case, on a similar set of facts where the Assessing Officer had allowed higher depreciation at 30% on trucks without making specific enquiries to determine whether they were actually used in the business of letting on hire, the Tribunal upheld the revisional order passed under section 263, holding that the assessment was both erroneo....
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....y the assessee was that the assets were acquired in FY 2016-17 and once they entered the block of assets, the WDV could not be reduced in subsequent years under section 43(6)(c). We are unable to accept this contention, since the Principal Commissioner has correctly observed that tax depreciation is governed by the Act and not by accounting treatment, and that the statutory scheme read with ICDS-VII required an adjustment in the relevant year. We find merit in the conclusion of the Principal Commissioner that the Assessing Officer's omission to examine and decide this issue rendered the assessment order both erroneous and prejudicial to the interests of the Revenue. The reliance placed by the assessee on consistency of accounting treatment ....