TaxTMI 
TaxTMI 
2012 (4) TMI 233
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....ssee and the steel plant of IISCO also became the steel plant of the assessee. In order to meet the requirements of the assessee company, the Government of India sanctioned huge loans from the Steel Development Fund (SDF). The loans were to bear interest and had been taken over a period of years (1979-80 to 1993-94) in the past. Such loans stood at Rs. 5,277.16 crores as on 31.3.1999 in the assessee's books of account. The assessee came under great stress and difficult times from 1997 on account of glut in the international steel market due to heavy production of steel in South East Asia and the meltdown in USA. As a result of the glut, the prices of steel fell rapidly and the assessee started incurring heavy losses. The assessee, therefore, approached the Government of India in the year 1998 for waiver of loans granted from the SDF as well as to take steps to help the steel industry in India. One of the measures taken by the Government of India to provide relief to the steel industry in general and to the assessee in particular was to waive repayment of the loans granted to the assessee. As noted earlier, the loans stood at Rs. 5,277.16 crores as on 31.3.1999. The Gove....
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....splaced. The reduction in the value of the assets was occasioned by the waiver of the loan by the Government and the amount of reduction was to the extent of accretion in capitalized interest." In this view of the matter, the claim for depreciation to the extent of the loans waived was disallowed in all the assessment years under consideration. The relevant figures are as under: Assessment Year Depreciation Disallowed ( Rs.) 2000-01 64,692.69 lakhs 2001-02 47,672.00 lakhs 2002-03 35,775.63 lakhs 2003-04 26,871.54 lakhs 4. The disallowance of the claim of depreciation having been confirmed by the CIT(Appeals), the assessee filed further appeals to the Tribunal. The Tribunal considered the matter elaborately and upheld the orders of the departmental authorities and hence, the present appeals. 5. On 26.08.2011, the appeals were admitted and the following substantial questions of law were framed : "(i) Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal erred in law and on merits in confirming the reduction of Written Down Value of block of assets by the amount of loan waived by the Central Government as per Ex....
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....Revenue cited the judgment of the Supreme Court in C.K. Gangadharan Vs. Commissioner of Income Tax (2008) 304 ITR 61 in which the earlier judgment in Kaumudini Narayan Dalal And Anr. (supra) was considered and it was held that the non-filing by the department of the appeal in one case would not operate as a bar on the department to file an appeal in another case where there is just cause for doing so or it is in the public interest to do so or for pronouncement by a higher court because of divergent views expressed by the tribunals or the High Courts. The ratio of this judgment is that it is not an inviolable rule or practice that the department cannot file an appeal in a case where an identical decision in another case had not been appealed against. There are exceptions to the rule and we are satisfied that the present appeals should not be allowed on this ground. We should examine and decide the appeals on merits. We accordingly, reject the submission made on behalf of the assessee. 7. Section 32 of the Act deals with depreciation. It says that in respect of certain tangible and intangible assets which are owned by the assessee and used for the purposes of the business, a dedu....
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....tate Government or any authority established under any law or by any other person, in the form of a subsidy or grant or reimbursement (by whatever name called), so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee: Provided that were such subsidy or grant or reimbursement is of such nature that it cannot be directly relatable to the asset acquired, so much of the amount which bears to the total subsidy or reimbursement or grant the same proportion as such asset bears to all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee." The aforesaid Explanation was explained by the Board in Circular No.772 dated 23.12.1998 [reported in (1999) 235 ITR (St.) 35]. The relevant part of the Circular is reproduced below: "22.2 Explanation 10 provides that where a portion of the cost of an asset acquired by the assessee has been net directly or indirectly by the Central Government or a State Government or any authority established under any law or by any other person, in th....
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....3(1), a case of waiver of a loan can never be considered as meeting the full or a part of the cost of the assets. 11. Since the substantial questions of law framed do not cover this aspect, we have considered it appropriate to frame the following substantial question of law, in addition to the questions already framed: - "Whether in the facts of the present case waiver of loan would result in reduction of actual cost under Section 43(1) of the Income Tax, 1961?" 12. We are unable to accept the contention of the assessee that the case is not covered by the main provisions of Section 43(1) because of the treatment given by the assessee in its books of account. We have earlier noticed that in the books of account, the assessee had actually reduced the cost/WDV of the assets by the amount of the loans waived by the Government of India. In the returns, however, the depreciation was claimed without reducing the loans from the cost/WDV of the assets. It is true that the manner in which entries are made in the books of account is not conclusive of the question, which has to be resolved on a true interpretation of the provisions of law. However, the real nature of a transaction can....