TaxTMI 
TaxTMI 
1985 (10) TMI 45
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.... the assessee company under 10 per cent. Central Outright Grant or Subsidy Scheme, 1971 was not to be reduced from the cost of the assets owned by the assessee-company under section 43 of the Income-tax Act, 1961 ? " The petitions were filed in the following circumstances. The assessee, in both the petitions, Ravindra Tube Limited, had set up an industrial unit in a selected backward district/area and was entitled in terms of "10 per cent. Central Outright Grant or Subsidy Scheme, 1971 ", to 10% grant or subsidy by the financial institutions/state government, during the two previous years corresponding to the assessment years 1977-78 and 1978-79. The assessee received amounts of Rs. 3,91,275 and of Rs. 3,57,907, respectively, as subsidy ....
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....ing that the fixed assets in question were bought long before the subsidy was received and also because the subsidy was in relation to some other purpose. " We have heard learned counsel for the Revenue and the assessee. By its notification of August 26, 1971, the Central Government promulgated the " 10% Central Outright Grant or Subsidy Scheme, 1971 " for industrial units " to be set up " in selected backward districts/areas. According to para 3 of the Scheme, it is applicable to industrial units in selected districts/areas as defined in the Scheme other than those whose total fixed capital investment would exceed Rs. 50 lakhs. Clause 4(f) of the Scheme defines the expression " fixed capital investment ", as meaning, investment on land,....
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....d the claims of the assessee on the ground that the assessee had claimed depreciation even on those assets which were " linked with the subsidy received from the Government ". The assessment order, however, gave no indication as to how the assets in respect of which depreciation was claimed were linked with the subsidy received from Government. In appeal, the Commissioner of Income-tax posed the question whether the cost of any of the assessee's fixed assets was met, directly or indirectly, within the meaning of section 43(1) of the Act by the Government as a result of the subsidy granted to the assessee. The Commissioner then noted the preamble to the Scheme that subsidy was meant for industrial units " to be set up " in certain selected a....
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....of the cost of the fixed assets in question by the subsidy received within the financial year. We asked learned counsel for the assessee to file a copy of the assessee's application for the grant and of the correspondence exchanged between the parties as also copy of the mortgage deed that may have been executed by the assessee in favour of the Government in terms of the Scheme. The assessee filed compilation of documents consisting of the aforesaid copies. A copy of the order of this court in the case of Jindal Industries was also filed. The mortgage deed executed by the assessee in favour of the financial institution, inter alia, recites that the company required money for the purchase of machinery and construction of factory building,....