Hooghly Dock & Port Engineers Limited vs. DCIT, Circle(1), Kolkata

Parties Involved

Facts Summary

This appeal arises from an order passed under section 250 of the Income Tax Act, 1961 by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi. The assessee, Hooghly Dock & Port Engineers Limited, filed its return of income on 27.03.2017 declaring a total income of Rs. 35,77,05,680/-. A notice under section 148 of the Act was issued on 26.06.2021. The main issue was the amount of Rs. 1,33,00,000/- received from the Government of India for meeting the expenses of employees opting for VRS. The Assessing Officer (AO) held that this amount should have been routed through the Profit & Loss (P & L) Account and not through the balance sheet, where the unspent amount was shown as a liability. The AO relied on Accounting Standards, specifically Ind AS-20, and the case of CIT Vs. Steel Authority of India reported in 263 ITR 211 (Delhi). Aggrieved by the addition of Rs. 35,97,000/-, the assessee approached the Learned CIT(A), who also relied on the same case and Ind AS-20 to uphold the AO’s decision. The assessee then approached the ITAT with several grounds of appeal.…

Legal Issues

• 1. Whether the accounting treatment accorded by the assessee for the Government grant is correct as per section 145(1).
• 2. Whether the grant received 'in cash' falls within the description contained in section 28(iv) and is therefore taxable under section 28(iv).
• 3. Whether the receipt of the Government grant is income under section 28(iv) since it has not arisen from business.
• 4. Whether Ind AS 20 is applicable to the assessee for the assessment year 2015-16.
• 5. Whether the decision in Steel Authority of India is applicable to this case.
• 6. Whether the Rule 230(8) of General Financial Rules of Govt of India requires the assessee to refund the unspent/advance of VRS grant to the Consolidated Fund of India.

Judgment Outcome

Decided in favour of Assessee.

Precedents Relied Upon

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