IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH Before: DR. BRR Kumar, Vice President And Shri Siddhartha Nautiyal, Judicial Member ITA No: 1275/Ahd/2025 Assessment Year: 2020-21 Tourism Corporation of The PCIT Gujarat Limited Ahmedabad-3, Block No 16, 4th Floor, Vs Ahmedabad Udhyog Bhavan, Sector 11, Gandhinagar-382017, Gujarat, India (Respondent)

PAN: AAACT7252J (Appellant)

Assessee Represented: Shri Sunil Maloo, CA Revenue Represented: Shri R.P. Rastogi, CIT-DR Date of hearing : 15-09-2025 Date of pronouncement : 01-10-2025 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-

This appeal is filed by the Assessee as against the appellate order dated 28.03.2025 passed by the Principal Commissioner of Income Tax-3, Ahmedabad arising out of the assessment order passed under section 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the 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 and mandate of Section 263 of the Act.

3. The appellant reserves the right to add, amend, modify, or alter any ground of appeal during the course of the appellate proceedings.

3. The brief The brief facts of the case are that the assessee company filed its original return of income on 31.03.2021 declaring income of Rs. 36,03,62,570 and the assessment under section 143(3) read with section 144B of the Act was completed on 16.09.2022 accepting the returned income. However, on examination of case records, Ld. Pr. CIT noted that the assessee received Government grants during the relevant period which were credited to a deferred Government account instead of being reduced from the cost or written down value of the relevant block of assets; only a small portion of the grants was amortised to profit and loss and offered as income while depreciation was claimed on the full asset value, leading to an excess claim of depreciation. The assessee submitted before Ld. Pr. CIT that its accounting policy of crediting grants to a deferred account and amortising a part each year is consistent and has been followed regularly, and that similar treatment had been accepted in prior years. The assessee relied on principles of consistency and on judicial precedents in support of its approach and submitted that no change was called for and therefore the Assessing Officer had correctly accepted accounts prepared under the Companies Act. The assessee also pointed out that a portion of grants 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 balance remained in the deferred account; because the WDV of the asset block was not reduced by the grant amount the assessee effectively claimed higher depreciation (at least about