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2016 (6) TMI 560 - GUJARAT HIGH COURT

2016 (6) TMI 560 - GUJARAT HIGH COURT - TMI - Subsidy receipt - merely because the subsidy is transferred to the capital account of the partners, the cost of assets could be reduced by the said amount while working out the depreciation allowance? - Held that:- Subsidy which was received against the investment was made in a backward area where industries were not present. The same was for promotion and that will not reduce the value of the assets. In that view of the matter, considering the evide .....

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ismissed, confirming the order of CIT (Appeals) whereby the subsidiary which was received by the appellant which was taken was reduced from capital investment. 2. This Court on 30.11.2005 had admitted the matter wherein the following questions were framed for consideration :- [1] Whether, on the facts and circumstances of the case the Income Tax Appellate Tribunal was justified in law in holding that even in case of subsidy which was admittedly received in a year, earlier to the year under consi .....

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l for the appellant Mrs. Swati Soparkar has drawn our attention to the decision of this Court rendered in Tax Appeal No.255/2007 on 05.10.2015 whereby the first question was decided in favour of the assessee and the second question which was framed by this Court was also answered in favour of the assessee. 4. Learned Counsel for the respondent Mr. K.M. Parikh has taken us to the order of the CIT (Appeals) and contended that the view taken by the authorities is just and proper in view of the Expl .....

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ment amounting to ₹ 8,73,702/-. The Assessing Officer has reduced the subsidy relatable to each asset from the cost of each asset. The action of the Assessing Officer is in conformity with the provision of Explanation 10. The only contention of the assessee is that during the year under consideration the subsidy was not received and, therefore, the Assessing Officer was not justified in making the adjustment in this year. We are unable to accept the above submission. Depreciation has to be .....

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No.1 of the assessee's appeal is rejected. 5. We have heard learned Advocates for the respective parties and perused the records of the case. It is necessary to refer to Paragraphs 9 and 10 of Tax Appeal No.255/2007 wherein it is observed as under :- 9. At this juncture, it may be noted that the expression actual cost envisages the actual cost of asset as reduced by any amount received directly or indirectly from any person or authority and Explanation 10 to section 43 (1) of the Act, clear .....

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ould not be included in the actual cost of the asset to the assessee. In other words, the cost of the asset in the hands of the assessee would stand reduced to the extent of subsidy received by the assessee for the purchase of such asset. However, in the present case, the assessee created total facility by constructing building and installing various machineries in 1993-94. Thus, the actual cost of the assets in respect of which subsidy has been granted, came to be determined at the relevant tim .....

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d. The subsidy came to be actually given in the year under consideration; a long time after the actual cost of assets came to be determined under section 43(1) of the Act. The question that arises for consideration is as to whether Explanation 10 to section 43(1) of the Act can be given effect to in the facts and circumstances of this case, by reducing the actual cost of the assets by the amount of subsidy received by the assessee. To put it differently, whether at this stage it would be possibl .....

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r by deducting the moneys payable in respect of any asset within the block, which is sold, discarded or demolished or destroyed during the previous year together with the amount of the scrap value. The statute does not contemplate any other category for computing the written down value of a block of assets. Therefore, section 43(6) (c) of the Act does not permit reducing the written down value of the block of assets by the amount of subsidy received in relation to some of the assets forming part .....

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