TMI Blog1995 (4) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... nature is that of a loan from the Government ? 2. Whether the Tribunal was right in coming to the conclusion that deduction under section 80J on the subsidy amount would not be available as the said amount was not assessee's own capital contribution ?" The brief facts of the case are that the assessee claimed deduction under section 80J by treating the opening balance of subsidy amounting to Rs. 4,31,340 as part of the capital employed by the firm. The claim of the assessee was rejected by the assessing authority on the ground that the subsidy which is granted to the assessee as a percentage of the investment made in the industry is in the nature of the cost contributed towards the capital asset and, therefore, to that extent the cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing would not be entitled to avail of the benefit under section 80J for a period of five years in respect of the subsidy received by the industrial undertaking. Clause (iii) provides for the exclusion of borrowed money and debts owed by the assessee. The amount of subsidy is neither borrowed money nor a debt owed and has merged with the capital which has been employed by the industrial undertaking. The amount of capital employed has to be computed in the manner laid down under clause (ii) and Explanation 1 to clause (ii) taking into consideration the assets mentioned therein, the actual cost of which has to be taken in accordance with the provisions of section 43(1) of the Act. The amount of subsidy is not to be excluded from the actual cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The observation of the Tribunal that the subsidy is a loan was considered by this court in the case of Agarwal Industries v. CIT [1995] 211 ITR 30 (D.B. I.T. Ref. No. 51 of 1988), decided on July 21, 1994 and it was held that it cannot be considered as a loan. In these circumstances, we are of the view that the Tribunal was not justified in holding that till the period of five years from the date of grant of subsidy is not completed its nature is that of a loan from the Government. We are also of the view that the Tribunal was not justified in coming to the conclusion that the deduction under section 80J on the subsidy amount would not be available as the said amount was not the assessee's own capital contribution. The reference is a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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