Capital subsidy does not reduce actual asset cost for depreciation, following binding tax principle.

Capital subsidy received from the Government was held not to reduce the actual cost of assets for depreciation purposes under the Income-tax Act, because an earlier binding decision had already settled that such subsidy is not deductible from asset cost. Applying that principle, the assessee's subsidy could not be treated as a reduction from the actual cost while computing depreciation, and the issue was answered against the Revenue.

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Issues: Whether capital subsidy received from the Government is to be deducted from the actual cost of the assets for the purpose of computing depreciation under section 43(1) of the Income-tax Act, 1961.

Analysis: The question was covered by an earlier binding decision holding that capital subsidy does not reduce the actual cost of assets for depreciation purposes. Applying that principle, the subsidy received by the assessee could not be treated as a deduction from the cost of the assets while allowing depreciation.

Conclusion: The subsidy was not deductible from the actual cost of the assets for the purpose of depreciation, and the question was answered in the affirmative, against the Revenue.

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