TMI Blog1990 (7) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... e of 1971 (sic) for industrial, units set up in selected backward districts or areas, should not be reduced in working out the 'actual cost' as defined under section 43(1) of the Income-tax Act, 1961, for the purpose of computing depreciation, investment allowance on plant and machinery and for the purpose of computing the capital employed under section 80J of the Income-tax Act, 1961, for the assessment years 1982-83 and 1983-84 ?" The assessee is a private limited company carrying on the business of manufacture and sale of saline disposable plastic sets which are used by hospitals and doctors. The factory of the assessee is located at Kalol in Panchmahal District of Gujarat which is declared as a backward area for the purpose of Setting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in backward areas. Hence, the subsidy was not liable to be deducted from the cost of the assets under section 43(1) of the Incometax Act. From this decision of the Tribunal, the above question has been referred to us. By consent of parties, we have been given the notification issued by the Ministry of Industrial Development, New Delhi, F. 7(15)/71-10 published in the Gazette of India, Extraordinary, Part 1, section 1, dated August 26, 1971, and, amendments to it, vide notifications of September 30, 1972, and June 19, 1973, as also the manual for " 10-15 % Central Investment Subsidy Scheme". It is also an agreed position that the scheme of the State Government in question is similar to this scheme. Under the notification, it is stated tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on a percentage of the fixed capital investment, namely, investment in land, building, plant and machinery. He, therefore, submits that the subsidy is nothing but an amount given towards the cost of these fixed capital assets. He, therefore, submits that the subsidy is deductible from the cost of these assets under section 43(1). We are unable to accept this submission of Mr. Jetley. In the first place, the subsidy is, in terms, for the purpose of encouraging industries being set up in certain selected backward districts or areas, or for the purpose of shifting industrial units to such backward districts or areas. It is true that the quantum of subsidy is calculated on the basis of the fixed capital investment of the company in land, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme, the Andhra Pradesh High Court held that the financial incentives which were granted by the Central Government and the State Government were basically directed to encourage and induce entrepreneurs to move to backward areas and establish industries there so that the region may be developed and the welfare of the people living in that region be promoted. The Andhra Pradesh High Court also held that there is no provision , either in the Central Subsidy Scheme or in the State Incentive Scheme, to show that entrepreneurs are granted the subsidy for the specific purpose of meeting a portion of the cost of the assets. The specified percentage of the fixed capital cost taken as the basis for determining the subsidy is only a measure adopted u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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