TMI Blog1995 (7) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipt ? " It would be necessary to note the facts giving rise to the question. In the accounting year relevant to the assessment year 1980-81, the assessee received subsidy in a sum of Rs. 66,475 called in vestment subsidy. The Income-tax Officer treated the subsidy as an addition to the net profits earned by the assessee and assessed the same accordingly. On appeal, the Commissioner confirmed the order of the Income-tax Officer relying upon the judgment of this court in CIT v. Sahney Steel and Press Works Ltd. [1985] 152 ITR 39. The assessee went in appeal before the Income-tax Appellate Tribunal. The Tribunal distinguished that judgment and held that the subsidy received was not a trading receipt and consequently deleted the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up new industrial units and/or effecting substantial expansion of the existing units will be eligible for investment subsidy on the fixed capital cost at 10 per cent. of the fixed capital cost subject to a ceiling of Rs. 10 lakhs in all the areas which have been declared as backward under the six-point formula by the Government (vide annexure I) and excluding those covered by the Central Subsidy Scheme or the list of Scheduled (Tribal) Areas. " From a perusal of the extract of the scheme, it is clear that the incentive was granted for the purpose of setting up new industrial units and/or effecting substantial expansion of existing units. The quantum of subsidy offered was 10 per cent. of the fixed capital subject to a maximum of Rs. 10 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The court held that the subsidy was granted more as recompense for the hardships and inconveniences which the entrepreneur might encounter while setting up industries in backward areas and, therefore, the subsidy could not be deducted from the actual cost of the assets for computing depreciation allowance, which should be allowed on the actual cost of the assets without reducing the same by the amount of subsidy granted. We may point out here that in that case the contention of the Revenue was that the subsidy was a capital receipt and, therefore, it had to be deducted from the actual cost of the assets on which depreciation was to be granted. Now, reverting to CIT v. Sahney Steel and Press Works Ltd. [1985] 152 ITR 39 (AP) wherein the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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