INCOME TAX OFFICER v. PERIWAL UDYOG
[Citation -1987-LL-0410-5]

Citation 1987-LL-0410-5
Appellant Name INCOME TAX OFFICER
Respondent Name PERIWAL UDYOG
Court ITAT
Relevant Act Income-tax
Date of Order 10/04/1987
Assessment Year 1985-86
Judgment View Judgment
Keyword Tags plant and machinery • special bench
Bot Summary: In this appeal by the Revenues, the issue is regarding the amount of subsidy to be deducted from the cost of plant and machinery for purposes of allowing of depreciation. This issue has come up in several cases and we have been consistently holding that the subsidy amount though calculated with reference to the cost of investment made by the an entrepreneur in his industry, being allowed by the Government in the interest of industrialisation, is not to be treated as a contribution of cost by the Government towards any specific asset. The depreciation has to be allowed with relevance to the cost as was incurred on the machinery or plant without deducting therefrom the amount o f subsidy received from the Government. Recently, the Andhra Pradesh High Court in the case of CIT vs. Godawaridevi Plywood Ltd. 21 TLR 325 had the occasion of considering this issue as well as the Special Bench. Their Lordships elaborately considered the various terms of providing of subsidy for industrialisation. Their Lordships were of the view that both views possible, that is, it could be treated as contribution towards the cost of plant and machinery as also not contribution as was held by the special Bench of the Tribunal. We chose to take the view in favour of the assessee.


In this appeal by Revenues, issue is regarding amount of subsidy to be deducted from cost of plant and machinery for purposes of allowing of depreciation. This issue has come up in several cases and we have been consistently holding that subsidy amount though calculated with reference to cost of investment made by an entrepreneur in his industry, being allowed by Government in interest of industrialisation, is not to be treated as contribution of cost by Government towards any specific asset. Therefore, depreciation has to be allowed with relevance to cost (gross amount) as was incurred on machinery or plant without deducting therefrom amount o f subsidy received from Government. This view was being taken on basis of ruling of special Bench in case of Pioneer Match Works vs. ITO (1983) 15 TTJ (Mad) 88 (SB): (1983) 3 ITD 714 (Mad) (SB). Recently, Andhra Pradesh High Court in case of CIT vs. Godawaridevi Plywood Ltd. 21 TLR 325 had occasion of considering this issue as well as Special Bench (supra). Their Lordships elaborately considered various terms of providing of subsidy for industrialisation. Their Lordships were of view that both views possible, that is, it could be treated as contribution towards cost of plant and machinery as also not contribution as was held by special Bench of Tribunal . we, however, chose to take view in favour of assessee. Since even this case goes to support plea of assessee, we, are accordingly upholding order of AAC and dismiss departmental appeal. *** INCOME TAX OFFICER v. PERIWAL UDYOG
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