Government subsidy for backward-area industry does not reduce actual asset cost for depreciation or investment allowance.

A government subsidy granted as an incentive for setting up an in a backward area does not reduce the actual cost of the assets acquired, because it is not a payment made towards any specific asset and has no nexus with the asset cost. As a result, the subsidy is not deductible from actual cost for depreciation, investment allowance, development rebate, or similar allowances, and the assessee remains entitled to those deductions without such reduction.

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Issues: Whether subsidy received from the Central Government for setting up an industry in a backward area is deductible from the cost of the assets while computing actual cost for depreciation and investment allowance.

Analysis: The subsidy was held to be an incentive granted for setting up industry in a backward area and not a payment made towards any specific asset. Since the amount had no nexus with the cost of the particular assets, it could not be treated as reducing the actual cost for the purpose of depreciation, investment allowance, development rebate, or similar allowances.

Conclusion: The subsidy is not to be deducted from the cost of the assets, and the assessee is entitled to depreciation and investment allowance without such deduction.

Ratio Decidendi: A government subsidy granted as an incentive for establishing industry in a backward area does not form part of or reduce the actual cost of the assets acquired for the business.

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