9911796707
TMI Blog1981 (3) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... 1978. The assessee-company had received a subsidy of Rs. 50,125 from the Directorate of Industries, Government of Rajasthan, Jaipur against capital investment in building and machinery. According to the ld. Commr. under s. s. 32 and 33 of the Act, the assessee was entitled to depreciation and development rebate on the actual cost of building and plant and machinery. According to s. 43(1) of the Act, however, the actual cost of the building and plant and machinery had to be reduced by any amount received as subsidy towards investment in these assets. The ld. Commr. was, therefore, of the opinion that the ITO ought to have reduced the assessee's investment in these assets by a sum of Rs. 50,125 received by way of subsidy from the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d before us that the impugned amount as received by the assessee as subsidy was on capital account but was not related or relatable to any acquisition of capital asset in land, buildings, plant or machinery. The grant was given at the rate of 10 per cent which was raised to 15 per cent on the basis of the investments made in fixed assets. The said grant was given with a view to encouraging industries to move from Metropolitan cities and other developed areas to backward areas. Therefore, when the subsidy was determined with reference to capital cost or investment, it was not relatable to acquisition of assets by the assessee. Therefore, the subsidy as paid by the government would not enter the computation of actual cost and thereby causing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hasised by the ld. Commr. in his order and also reiterated by the learned departmental representative that the expression 'actual cost' which forms the basis for allowance of depreciation and development rebate under the provisions of ss. 32 and 33, has to be construed with reference to s. 43(1) of the Act. According to the said sub-section, the expression 'actual cost' means the actual cost of the asset to the assessee reduced by that portion of the cost thereof, if any, as has been made directly or indirectly by any other person or authority. This definition, to our mind, postulates meeting of the cost of the asset by any other person or authority directly or indirectly. Therefore, it has to be seen whether the grant of subsidy is intende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is intended to be adjusted against the actual cost of machinery, a specific mention has been made to that effect in the order granting subsidy. In this connection items 15 and 16 of the said order are relevant. It is next noticed that the subsidy as received by the assessee is treated as a part of general reserve and has not been adjusted against any specific item of asset belonging to the assessee. This aspect of the matter was also stressed by Shri Trivedi in the course of the submission which he has made. In this connection, we may usefully refer the decision of the Gujarat High Court in the case of CIT vs. Kaira District Co-operative Milk Producers' Union Ltd. 1978 CTR (Guj) 511. (1979) 116 ITR 319 (Guj). In that case, the assessee wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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