Court ruling on work-in-progress deduction and capital subsidy for depreciation

The court ruled in favor of the assessee regarding the inclusion of the capital value of work-in-progress for deduction under u/s 80J. Additionally, the court held in favor of the Revenue regarding the deduction of the capital subsidy received by the assessee for depreciation purposes under u/s 32. The reference was disposed of with no order as to costs.

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Issues involved: Interpretation of capital value of work-in-progress for deduction under u/s 80J and treatment of capital subsidy for depreciation u/s 32.

In the judgment delivered by S. S. SODHI J., the court addressed two questions. Firstly, whether the capital value of work-in-progress should be considered for inclusion in the capital computation base for computing the deduction u/s 80J of the Income-tax Act, 1961, and rule 19A(2) of the Income-tax Rules, 1962. The court referred to a previous decision in CIT v. Gopi Chand Textile Mills Ltd. [1989] 179 ITR 371, where it was settled that the capital value of work-in-progress should indeed be included. The question was answered in the affirmative, in favor of the assessee and against the Revenue.

Secondly, the court considered whether the capital subsidy received by the assessee should be deducted from the value of the assets while working out the written down value for allowing depreciation u/s 32 of the Act. Referring to a previous decision in CIT v. Jindal Brothers Rice Mills [1989] 179 ITR 470, the court held that the subsidy amount must be deducted for depreciation purposes. Consequently, this question was answered in the affirmative, in favor of the Revenue and against the assessee.

The court disposed of the reference accordingly, with no order as to costs.

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