1993 (3) TMI 85

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....vernment was not deductible from the cost of plant and machinery for the purpose of calculating depreciation thereon ? " The respondent is a public limited company with its registered office at Meghalaya. The dispute relates to the assessment year 1977-78. The respondent-assessee has plant and machinery, a part of which was purchased in the previous year relevant to the assessment year and the remaining part was purchased during prior years. It appears that, under the Central Subsidy Scheme, 1971, the respondent received a sum of Rs. 11,72,000 as Central subsidy against the investment of about Rs. 62,00,000 for purchase of plant and machinery. The respondent is entitled to deduction of depreciation from the profits and gains of the busin....

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....escribe the particular manner in which the beneficiary is to spend the subsidy amount. It is apparent that the beneficiary may use the subsidy amount for any purpose connected with industry as it desires. The quantification of the subsidy amount undoubtedly is based on the cost of the land, the rent for the building, or plant and machinery, as the case may be, and as a percentage of such cost. We will consider the relevant provisions of the Act as they stood in the assessment year. Section 2(45) of the Act defines " total income " as the total amount of income referred to in section 5 of the Act. Section 5 explains the scope of total income. Section 28 states, inter alia, that profits and gains of any business or profession carried on by....

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.... actual cost of the asset at the time of acquisition. In the case of an asset acquired in the previous year, the actual cost is the written down value. In other cases, actual cost less depreciation actually allowed is the written down value. As indicated under section 43, such actual cost of the asset to the assessee shall be reduced by any portion of the cost as has been met directly or indirectly by any other person or authority. According to the Revenue, subsidy represents a part of the cost met by the Central Government and, therefore, it must be reduced from the actual cost to the assessee in order to determine the actual cost and the written down value for the purpose of computing depreciation. According to the assessee, the subsidy g....