Actual cost for development rebate excludes no government contributions, as section 10(2)(vib) is read on its own terms.

Contributions received from Government, public authorities or local authorities are not deductible when computing the actual cost of machinery for development rebate under section 10(2)(vib) of the Indian Income-tax Act, 1922. The Explanation to section 10(5) is confined to that sub-section and cannot be extended to control section 10(2)(vib). In the absence of an express deduction rule in section 10(2)(vib), the actual cost of the machinery or plant to the assessee means the amount paid for the asset, even if the cost was met from outside contributions. Reliance on section 43 of the Income-tax Act, 1961 was rejected as being in a different statutory context.

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Issues: Whether contributions received from Government, public authorities, or local authorities are to be deducted in determining the actual cost of machinery for the purpose of development rebate under section 10(2)(vib) of the Indian Income-tax Act, 1922.

Analysis: The Explanation to section 10(5) begins with the words "for the purposes of this sub-section" and is confined to the definitions used within that sub-section. It cannot be extended to govern development rebate under section 10(2)(vib). In the absence of any express provision in section 10(2)(vib) requiring deduction of contributions met by Government or public or local authorities, the expression "actual cost of the machinery or plant to the assessee" is to be understood as the amount paid for the asset, irrespective of the source from which the cost was met. The contrary reliance on section 43 of the Income-tax Act, 1961 was rejected because that provision operated in a different statutory setting.

Conclusion: The contributions received from Government, public authorities, or local authorities are not deductible in computing the actual cost for development rebate under section 10(2)(vib); the question was answered in favour of the assessee.

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