Law: Income Tax Act, 1961

Section: 32

Income-tax----Depreciation---Written down value---Computation of written down value---Central subsidy not deductible---Indian Income Tax Act, 1961, S.32. Held, that the Tribunal was right in holding that subsidy of Rs.1,14,995 received by the assessee from the Government of India was not deductible for arriving at the written down value of the building and plant and machinery for purposes of grant of depreciation under the Income Tax Act, 1961. CIT v. P. J. Chemicals Ltd. (1994) 210 ITR 830 (SC) fol. CIT v. Jindal Brothers Rice Mills (1989) 179 ITR 470 (P & H) ref. JUDGMENT N. K. AGRAWAL, J.---The following question arising from the assessees case for the assessment year 1983-84 has been referred by the Income-tax Appellate Tribunal ("the Tribunal") at the instance of the Department under section 256(1) of the Income Tax Act, 1961 (for short, "the Act"): "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the subsidy of Rs.1,14,995 received by the assessee from the Government of India was not deductible for arriving at the written down value of the building and plant and machinery for purposes of grant of depreciation under the Income Tax Act, 1961?" The assessee had received certain money by way of Central subsidy. The Assessing Officer, while allowing depreciation on the assets, reduced the cost/written down value of the assets by the amount of subsidy. The assessees plea was that Central subsidy had been given after the purchase of the assets for the purpose of promotion of industry. The assessees plea was, however, not accepted. The Tribunal, however, took the view that the cost or the value of the asset cannot be reduced by the amount of subsidy while allowing depreciation on that asset. The assessees claim was, therefore, allowed and depreciation was required to be computed without deducting the amount of subsidy from the cost of the assets A Division Bench of this Court in CIT v. Jindal Brothers Rice Mills…

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