When the Subsidy is held not to be educed from Actual Cost of Asset for Depreciation calculation

Subsidy for setting-up industry in backward area couldn’t be reduced from actual cost of asset to compute depreciation

[2015] 57 taxmann.com 95 (Kolkata - Trib.)

IN THE ITAT KOLKATA BENCH 'A'

Universal Cables Ltd.

v.

Deputy Commissioner of Income-tax, Circle-6, Kolkata

Section 43(1) of the Income-tax Act, 1961 - Actual cost (Subsidy) - Assessment years 2008-09 to 2009-10 - Assessee was engaged in business of manufacturing and sale of Cables and Cable wires - It had put up a new project - Industrial investment promotion assistance in form of subsidy was given to assessee as project was located in backward area - Maximum ceiling of assistance was equivalent to fixed capital investment only - Subsidy was not given for meeting a part of capital expenditure incurred by assessee but as incentive for establishing or expansion of an unit and not for specific purpose of meeting a portion of cost of assets - Whether subsidy was in nature of capital receipt - Held, yes - Whether subsidy receipt should not be reduced from actual cost of fixed assets under section 43(1) for computing depreciation under provisions of Act - Held, yes [Paras 16 and 19][In favour of assessee]