TaxTMI 
TaxTMI 
1994 (2) TMI 54
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.... reduced from the cost of the assets owned by the assessee-company under section 43 of the Income-tax Act, 1961 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in adjudicating upon the nature of the subsidy without obtaining from the assessee the relevant documents constituting the basis of the subsidy ?" For the purpose of answering these questions it may be necessary to refer to some relevant facts. The assessment years involved are 1977-78 and 1978-79, with respective accounting years ending on December 31, 1976, and December 31, 1977. The assessee-company set up an industrial unit in the backward areas becoming entitled to "10 per cent. Central Outright Grant of Subsidy Scheme, 1971". Du....
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.... or authority. The simple question before us is if the subsidy forms any part of the element of actual cost for the purpose of granting depreciation/ development rebate. For this purpose, it may be relevant to refer to the provisions of the subsidy and what subsidy would mean in ordinary parlance as it is not legally defined otherwise. The Government of India made Schemes of 10 per cent. (later increased to 15 per cent.) Central grant or subsidy for industrial units to be set up in certain selected backward districts/areas with a view to promoting the growth of industries there. The scheme fixed the period under which it was to remain in operation ; its applicability to industrial units as defined in the scheme ; how the fixed capital in....
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....nt and machinery. The purpose, of the scheme, as is evident, is that it is for giving encouragement to entrepreneurs for setting up industrial units in selected backward districts/areas with a view to promoting the growth of industries there, and, thus, the development of those areas. The subsidy is not meant to form part of the cost of the assets of the assessee establishing the industrial unit and becoming entitled to the subsidy under the scheme. The word "subsidy" has not been defined either in the scheme or under the Act. We have, therefore, to give it the ordinary meaning or the meaning that is understood in commercial parlance. In Black's Law Dictionary (Sixth edition), " subsidy" is defined as under : "A grant of money made by....
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....as separately allowable towards cost of the machinery, plant and building, under the incentive scheme, and that it reduced the "actual cost" thereof and section 43(1) of the Act was clearly attracted. On the other hand, Mr. Aggarwal, learned counsel for the assessee, said that there was a string of judgments of almost all the courts in the country taking a contrary view and that it was only the Punjab and Haryana High Court which struck a discordant note. The judgments of the High Courts which Mr. Aggarwal referred to were of the Gauhati, Madras, Bombay, Calcutta, Gujarat, Andhra Pradesh, Karnataka, Madhya Pradesh, Kerala and Orissa High Courts. It is not necessary to burden our judgment with all these judgments and we will note only three ....