TMI Blog1991 (12) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... assets to arrive at the actual cost for the purpose of allowing depreciation and investment allowance ? " The background facts are that Messrs. Orissa Industries Limited (in short " the assessee ") is a public limited company carrying on the business of manufacture and sale of refractories, fire bricks, ceramics, etc., at Barang and Latikata. During the assessment year 1982-83, the petitioner claimed depreciation including extra shift allowance at Rs. 24,61,011. The Assessing Officer found that the assessee had received State investment subsidy amounting to Rs. 3,97,500 from the Government of Orissa. He was of the view that, while computing the allowable depreciation, the amount of subsidy was to be reduced from the cost of fixed assets. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43 makes it clear that in sections 28 to 41 and in section 43, unless the context otherwise requires, " actual cost " means the actual cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority. According to him, the receipt of subsidy has not been disputed and it is also not in dispute that the same was quantified at 10 per cent. of the fixed assets and, therefore, the Tribunal went wrong in holding that the cost was not partially met by the subsidy granting authority. Mr. Arjun Agarwala, learned counsel for the assessee, however, submitted that there is nothing on record to show that the subsidy was granted for the specific purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter August 1, 1980, subject to a limit of Rs. 15 lakhs in the specified districts. The set of rules called "Rules for Sanction of State Investment Subsidy" (hereinafter referred to as "the Subsidy Rules") were framed for the purpose. On facts, we find that the subsidy in question was not paid by the State Government to meet the cost of any assets of the assessee. It was given as an incentive for setting tip industrial units in backward areas. The subsidy was intended to augment the capital resources of the industry. As is evident from the above policy, it was essential to provide capital investment subsidy to increase the equity base of the project and make the entrepreneur viable to implement the project in a short period. Investment subsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neur viable to implement the project in a short period. The grant was for expansion of industrial units in the non-specified backward districts of the State. Since the subsidy is granted for this basic purpose, it does not appear reasonable to construe that the same was intended to enable the entrepreneur to meet a part of the cost of the assets. The payment of subsidy at a specified percentage of the fixed assets is a measure adopted under the scheme to quantify the subsidy and there appears to be no justifiable reason to hold that the subsidy was intended to meet a part of the cost of fixed assets. Merely because the application form for disbursement of subsidy posits furnishing of details of financial structure of the unit in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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