Tourism Corporation of Gujarat Limited Vs PCIT (ITAT Ahmedabad)
Past Acceptance No Defence in 263 – Tribunal Says Tax Depreciation Must Follow Act, Not Accounting Policy- ITAT Ahmedabad Upholds PCIT’s Revision u/s 263 on Excess Depreciation Due to Unadjusted Govt. Grants
Assessee, a state PSU, filed ROI declaring income of ₹36.03 crore. AO completed assessment u/s 143(3) r.w.s 144B accepting returned income. On record scrutiny, PCIT noticed that Government grants received for assets were parked in a deferred grant account, with only partial amortisation (₹3.87 crore out of total ₹113.05 crore including opening balance & current receipts). Depreciation was claimed on unreduced WDV, resulting in excess allowance. PCIT held AO failed to examine this issue in light of Explanation 10 to section 43(1), Finance Act 2015 amendments & ICDS-VII which mandate either reduction of actual cost/WDV or treating grant as income. AO’s omission rendered assessment erroneous & prejudicial to Revenue.
Assessee argued consistency in method since AY 2017-18, reliance on Companies Act accounts, past acceptance by department, & principle against double taxation. It contended that once assets enter block, WDV cannot be reduced in later years u/s 43(6)(c).
Tribunal rejected these arguments, holding that tax depreciation must follow statutory provisions, not accounting practice. Each AY is independent & past acceptance cannot bar correction. Following S.P. Chips Potato Pvt. Ltd. v. DCIT (ITA 548/Ahd/2019) & SC ruling in CIT v. British Paints India Ltd. (188 ITR 44), Tribunal held AO’s failure to examine grants treatment justified revision. It affirmed that unadjusted Govt. grants either reduce cost/WDV or are taxable as income, & AO’s silence made the order erroneous & prejudicial. Accordingly, Tribunal upheld PCIT’s order u/s 263, dismissing Assessee’s appeal.
