TMI Blog2003 (1) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... t the depreciation admissible on the generator?" - question No. 1 is answered in the affirmative, i.e., against the Department and in favour of the assessee. - question No. 2 is answered in the affirmative, that is, against the Department and in favour of the assessee. - - - - - Dated:- 16-1-2003 - Judge(s) : M. KATJU., PRAKASH KRISHNA. JUDGMENT This is a reference under section 256(2) of the Income-tax Act, 1961. At the instance of the Revenue, the following two questions have been referred for the opinion of this court: "(1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the depreciation allowed at the rate of 15 per cent. on generator in the origi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st the reassessment order passed under section 143(3) and section 147(b) of the Income-tax Act. He took the view that the depreciation is allowed on the actual cost of the assets to the assessee as defined under section 43(1) of the Income-tax Act. Therefore, subsidy for the purposes of generator given by the U.P. Finance Corporation was deductible from the cost of the generator for working out the actual cost of the generator. On the question of rate of the depreciation on the generator as rectified by the Income-tax Officer the said order was also confirmed by the Appellate Assistant Commissioner. On further appeal the Income-tax Appellate Tribunal by its order dated May 21, 1980, held that the subsidy amount of Rs. 37,670 received from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. So far as question No. 2 is concerned the same is covered by a decision of the Supreme Court reported in CIT v. P.J. Chemicals Ltd. [1994] 210 ITR 830. The Supreme Court has held that the expression "actual cost" in section 43(1) of the Income-tax Act, 1961, needs to be interpreted liberally. Such a subsidy does not partake of the incidents which attract the conditions for its deductibility from "actual cost". The amount of subsidy is not to be deducted from the "actual cost" under section 43(1) for the purposes of calculation of depreciation. In view of the authoritative pronouncement by the Supreme Court question No. 2 is answered in the affirmative, that is, against the Department and in favour of the assessee. - - TaxTMI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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