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2020 (12) TMI 448 - AT - Income TaxDepreciation on computer hardware - whether Depreciation as section 43 does not require establishing any direct relationship between the assistance received under (*) utilization of the same in purchase of assets? - CIT(A) was of the view that the amount was given by the GoI for recapitalization, Further, that the same had been utilized for purchasing computers was also not established - HELD THAT:- We are unable to place much store on the contention that the amount received being neither a ‘subsidy’ nor ‘grant’ nor ‘reimbursement’, the section is inapplicable. The argument as to the provision being applicable only when the unit is set-up and not to a running concern, is without any basis either on facts or in law. We have already clarified that it is the nature of the sum, determined by the purpose for which it is given, that is relevant and determinative of the matter. As long as it is for meeting the cost of an asset, directly or indirectly, it is irrelevant whether the asset purchased or setup is at the commencement of the operations or by way of a substantial expansion or even in the regular course of business; a business enterprise being required to constantly upgrade itself as well as to replace the assets which have over time become obsolete, technologically or functionally, or otherwise worn out through user. The argument is de hors the express provision of law and, consequently, without reference to any judicial precedent. We do not consider the provision of s. 43(1) as applicable in the facts and circumstances of the case. There is nothing to show of any proposal for the acquisition of fixed assets. Rather, the capital infusion is a part of an all India exercise, undertaken covering all RRBs across India, under the aegis of RBI & NABARD, under whose administrative control the RRBs function, to improve their capital adequacy. The non-issue of shares would have no material bearing in the matter as it does not, in view of contributions proportionate to their respective shareholdings, disturb the ratio of either their voting rights or the proportion of the risk borne by the promoters, the providers of the risk capital. While, therefore, it is not correct to say that the funds were not meant for computers, being an eligible asset of the business, acquired for its purposes, it also cannot be said that the same is for meeting their cost, even as we have found that the same is not a relevant consideration in the instant case inasmuch as the same do not qualify to be a subsidy, grant, reimbursement, or the like. Raising funds to finance the acquisition of the assets, it cannot be said to be toward meeting the cost of the asset to be acquired therefrom, whether directly or indirectly, i.e., within the meaning of the same u/s. 43(1), and for which we may also advert to the word ‘context’ referred to in s. 43, i.e., prior to sub-section (1), so that it is only where the context admits thereof that the definition provided therein is to be adopted. The occasion to examine the scope of word ‘indirectly’, appearing both in section 43(1) as well as in Explanation 10 thereto, therefore, does not arise for consideration in the facts of the case. ‘Cost’, it attributes, as well as whether the same has been met directly or indirectly, in the facts of the case, by any person or authority, are essentially questions of fact. Qua the law in the matter, Explanation 10 read with proviso thereto clarifies that even where the grant, etc., is not specifically provided for that purpose, if it results in or leads to the cost of the asset being met by another, the same has to be given effect to. Surely, the same is not applicable in the facts and circumstances of the case. No portion of the cost of the computer hardware (i.e., ₹ 1779.09 lacs) can be said to be, in law or on facts, met by the capital contribution of ₹ 20 cr. to any extent, for its ‘actual cost to the assessee-bank being reduced with reference to it. Decided against revenue.
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