Law:

Section:

Section 43B of the Income-tax Act, 1961 - Business disallowance - Certain deductions to be allowed only on actual payment - Assessment year 1985-86 - Whether in view of proviso to section 43B which is retrospective in operation, assessee was entitled to deduction of sales tax collected in month of March 1985 but deposited in month of April 1985 - Held, yes [In favour of assessee] Section 43(1), read with section 32 of the Income-tax Act, 1961 - Actual cost - Assessment year 1985-86 - Whether Government subsidy is an incentive and, it does not partake character of a payment either directly or indirectly to meet actual cost of an asset under section 43(1) - Held, yes - Whether, therefore, where Tribunal allowed depreciation on generator without reducing its cost by amount of subsidy received from Government, said order of Tribunal did not require any interference - Held, yes [In favour of assessee] FACTS The assessee was a registered firm carrying on a business of manufacturing and sale of glass wares. It filed return for the assessment year 1985-86 and claimed. (i) Deduction of sales tax collected in the month of March 1985 but deposited in the month of April 1985 ; and (ii) depreciation on the cost of the generator. The Assessing Officer added the sales tax deposited in the month of April, 1985 and gave depreciation of 15 per cent on the cost of the generator after reducing it by the subsidy received from the State Government. On appeal, the Commissioner (Appeals) deleted the addition of the sales tax amount and allowed 20 per cent depreciation on the cost of the generator without reducing it by the subsidy received from the Government. The Tribunal upheld the order passed by the Commissioner (Appeals). On revenue's appeal: HELD There was no dispute that the sales tax dues collected for the month of March, 1985 was paid by the assessee in the month of April 1985. This finding had been recorded by the Assessing Officer. Section 43B as the initially enacted, did not allow such deductions but this was changed with insertion of a proviso that allowed such deduction. However, there was dispute whether the proviso was with retrospective effect or not. [Para 10] The…

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