2019 (6) TMI 251 - HC - Income Tax

Court rules in favor of assessee on premium deduction & cash subsidy for depreciation.

The Court ruled in favor of the assessee on both issues. Regarding the deduction of premium payable on debentures, the Court followed relevant judgments ... Proportionate deduction during the year on account of premium payable on debentures - deferred revenue expenses - HELD THAT:- The questions of law involved in UNIVERSAL CABLES LTD. VERSUS CIT [2000 (3) TMI 50 - CALCUTTA HIGH COURT] were identical to those involved here. The Division The Division Bench relying on the Supreme Court decision in the case of Madras Industrial Investment Corporation Ltd. Versus CIT [1997 (4) TMI 5 - SUPREME COURT] answered the question in favour of the assessee. Cash subsidy received in earlier year on generator - whether deductible from its cost for the purpose of computing depreciation allowable to the assessee company during the year? - HELD THAT:- Issue answered in favour of the assessee by relying on another Supreme Court decision in the case of CIT Versus P. J. Chemicals Ltd. [1994 (9) TMI 1 - SUPREME COURT] Both the questions are answered in the negative in favour of the assessee. Issues:1. Whether the Tribunal was justified in not allowing proportionate deduction for premium payable on debentures.2. Whether the Tribunal was justified in holding that cash subsidy received on a generator is deductible from its cost for computing depreciation.Issue 1:The Court noted that no statement of case was drawn up by the tribunal, so the questions dated 23rd December, 2008 were considered as the statement of case. The first question pertained to the deduction of premium payable on debentures issued by the company during the assessment year 1984-85. Referring to a Division Bench judgment of the Court in a similar case, the Court relied on the Supreme Court's decision in the case of Madras Industrial Investment Corporation Ltd. vs. CIT. The Division Bench's decision was in favor of the assessee, and since the relevant judgments were not reversed, the Court followed them. Consequently, the first question was answered in the negative in favor of the assessee.Issue 2:The second question involved whether the cash subsidy of a certain amount received in an earlier year on a generator is deductible from its cost for computing depreciation. The Court referred to another Supreme Court decision in the case of CIT vs. P. J. Chemicals Ltd. The Division Bench had also ruled in favor of the assessee on this issue. As the relevant judgments remained in force, the Court followed them and answered the second question in the negative in favor of the assessee. The reference application was disposed of, with directions to the Registrar to send a copy of the judgment and order to the Income Tax Appellate Tribunal for further action based on the Court's decision.This detailed analysis of the judgment highlights the issues involved, the legal principles applied, and the final decisions rendered by the Court in each aspect of the case.