TMI Blog1997 (6) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ances of the case, should not the central subsidy received be reduced from the cost of the asset for the purposes of depreciation and investment allowance ?" It is admitted by both sides that the above issue is settled by a decision of the Supreme Court in CIT v. P. J. Chemicals Ltd. [1994] 210 ITR 830, in favour of the assessee. In the light of the above, we answer the question in the negative, against the Revenue and in favour of the assessee. Income-tax Reference No. 15 of 1993: This reference, at the instance of the Revenue, arises from the order of the Income-tax Appellate Tribunal, Cochin Bench, in 1. T. A. No. 525/Coch. of 1987. The relevant assessment year is 1980-81. The following question is referred for the opinion of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuted during the relevant accounting period. Depreciation on factory building was initially allowed by the Assessing Officer. The Commissioner of Income-tax (Appeals) took the view that only the actual payment of Rs. 17,353 with respect to expenditure on land and buildings would be allowable and not the sum of Rs. 86,764 as claimed by the assessee under sections 35 and 32 of the Income-tax Act. With respect to the claim for depreciation, the first appellate authority directed to disallow depreciation with respect to the factory shed inasmuch as the ownership in the shed was not vested with the assessee during the previous year relevant to the assessment year 1980-81. Aggrieved by the above, the assessee went in second appeal before the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red within the three years immediately preceding the commencement of the business shall be deemed to have been incurred in the previous year in which the business is commenced ; Explanation 2.----For the purposes of this clause,--- (a) 'land' includes any interest in land ; and (b) the acquisition of any land shall be deemed to have been made by the assessee on the date on which the instrument of transfer of such land to him has, been registered under the Registration Act, 1908 (16 of 1908), or where he has taken or retained the possession of such land or any part thereof in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882), the date on which he has so taken or re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to get the benefit of deduction in respect of capital expenditure on scientific research. It is sufficient that the capital expenditure is incurred in the previous year as provided under the provisions of section 35. It is not necessary that the ownership over the land and building should have been acquired by the assessee in the previous year. We are also of the view that the Tribunal has correctly found that Explanation 2 is declaratory in nature and therefore it would be made applicable for the relevant assessment year also, even though, the Explanation had come into the statute only with effect from April 1, 1984. In the light of the above, we answer the question referred in the affirmative, in favour of the assessee and against the R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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