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2008 (1) TMI 485 - AT - Income TaxNature of Subsidy "Capital or Revenue"? - Deduction from the cost of assets under Explanation 10 to section 43(1) - subsidy not given to acquire any asset either directly or indirectly and thus it need not be considered for calculation of depreciation - HELD THAT:- In our considered opinion, even after insertion of Expln. 10 to s. 43(1) of the Act, the basic principle underlying in the decision of the apex Court in the case of P.J. Chemicals Ltd. [1994 (9) TMI 1 - SUPREME COURT] still holds the expression "met directly or indirectly" to come to the conclusion that only in a case where a subsidy or other grant was given to offset the cost of an asset, such payment/grant would fall within the expression 'met', whereas the subsidy received merely to accelerate the industrial development of the State cannot be considered as payments made specifically to meet a portion of the cost of the assets. we are of the view that the incentive in the form of subsidy cannot be considered as a payment directly or indirectly to meet any portion of the actual cost and thus it falls outside the ken of Expln. 10 to s. 43(1) of the Act. Thus, we are of the view that for the purpose of computing depreciation allowable to the assessee, the subsidy amount cannot be reduced from the cost of the capital asset. The AO is directed accordingly. In the result, the appeal filed by the assessee is allowed. Pronounced accordingly.
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