Commissioner of Income Tax vs Laxmi Industries

V.K. Singhal, J.—The Income Tax Appellate Tribunal has referred the following question of law arising out of its order dated April 24, 1981, in respect of the assessment year 1977-78 ;

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the amount of subsidy granted to the assessee by the Central Government was not granted with the intention to meet out the cost of assets belonging to the assessee directly or indirectly within the meaning of Section 43(1) of the Income Tax Act, 1961, and that was not deductible from the cost of assets for the purpose of allowing depreciation ?"

The above matter has been considered by a Division Bench of this court in the case of Commissioner of Income Tax Vs. Ambica Electrolytic Capacitors Pvt. Ltd. and Others, wherein it was held that the amount of subsidy granted by the Government was not deductible from the cost of assets.

Accordingly, the reference is answered in favour of the assessee and against the Revenue and it is held that the Tribunal was right in holding that the amount of subsidy granted to the assessee by the Central Government was not granted with the intention to meet out the cost of assets belonging to the assessee directly or indirectly within the meaning of Section 43(1) of the Income Tax Act, 1961, and that it was not deductible from the cost of assets for the purposes of allowing depreciation. No order as to costs.