Subsidy not to be reduced from actual cost of fixed assets and depreciation to be allowed on actual cost

Subsidy not to be reduced from actual cost of fixed assets and depreciation to be allowed on actual cost

IN THE INCOME TAX APPELLATE TRIBUNAL

The Relevant Text of the Order as follows :

3.2 With respect to ground No.3 of the assessee’s appeal pertaining to the action of the Ld. CIT (A) in directing that the capital subsidy be reduced from the written down value of assets, the Ld. AR submitted that this ground and Departmental appeal’s ground No.5 were related and could be taken up together. The Ld. AR drew our attention to the scheme of subsidy received from the Government of Goa which was placed on pages 237 & 238 of the Paper Book and it was submitted that the said subsidy was granted for making an investment in backward areas.

It was submitted that since the purpose of receiving the subsidy was not to reimburse the costs of fixed assets, directly or indirectly, the subsidy was, therefore, not required to be reduced from the costs of capital assets acquired. Reliance was placed on numerous case laws wherein it has been held that if the purpose of incentive/subsidy is towards the capital account, then notwithstanding the mode of computation of incentive/subsidy with reference to the investment in assets, Explanation-10 to section 43(1) of the Act would not be attracted. It was pleaded that the directions of the Ld. CIT (A) holding that the aforesaid subsidy was to be reduced from the actual cost of fixed assets and depreciation was to be allowed on actual cost so arrived at was not correct.

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Tags:  Judgement, Appellant Tribunal, Income Tax

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