Post-acquisition general subsidy does not reduce asset cost where it is unlinked to any specific fixed capital investment.

A post-acquisition general subsidy received by an industrial unit was held not to reduce the actual cost or written down value of its plant and machinery for depreciation purposes. The key reason was that the subsidy had no direct nexus with the cost of any specific fixed asset, was received after the assets were purchased, and could be used by the assessee in any manner it chose. On those facts, the subsidy was treated as independent of the capital cost of the assets, so no deduction from actual cost under section 43(1) was required.

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Issues: Whether a general subsidy received by an industrial unit after acquisition of plant and machinery had to be reduced from the actual cost or written down value of the assets for the purpose of depreciation under section 43(1) of the Income-tax Act, 1961.

Analysis: The subsidy was received after the assessee had already purchased the assets, and there was no direct nexus between the amount received and the cost of the fixed capital investment. The amount was available for use in any manner the assessee deemed fit and was not referable to any particular asset. On these facts, the case was covered by the Special Bench view relied upon by the first appellate authority, and the contrary decision cited by the Revenue was held to rest on different facts.

Conclusion: The subsidy was not required to be deducted from the written down value or actual cost of the capital assets, and the assessee succeeded on the issue.

Ratio Decidendi: A post-acquisition general subsidy unconnected with the cost of any specific asset does not reduce the actual cost of the asset under section 43(1) of the Income-tax Act, 1961.

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