COMMISSIONER OF INCOME-TAX vs. HARIHAR CRIMPERS

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ITR/188/1993HC GujaratGJHC24021242199315 April 1998Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE KUNDAN SINGH3 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the Tribunal was correct in law in confirming the order of the CIT(A). The Court reasoned that the subsidy granted by the Government was intended as an incentive to encourage entrepreneurs to establish industries in backward areas. The specified percentage of fixed capital cost used to quantify the subsidy was merely a measure of financial aid and not a payment to meet any portion of the actual cost. Therefore, the amount of subsidy was not to be deducted from the actual cost under Section 43(1) for the purpose of calculating depreciation, investment allowance, or relief under Section 80J. The Court relied on its own decision in CIT vs. Grace Papers Industries Pvt. Ltd., which was subsequently approved by the Supreme Court in CIT vs. P.J. Chemicals Ltd. The question referred was answered in the affirmative against the Revenue. The reference was disposed of with no order as to costs.

What were the facts?

The assessee, Harihar Crimpers, claimed relief under Section 80J for the relevant assessment year. During the previous year, the assessee received a subsidy from the State Government against the cost of plant and machinery. The Income Tax Officer (ITO) reduced the cost of the machinery by the subsidy amount for calculating investment allowance and depreciation. The Commissioner of Income-Tax (Appeals) [CIT(A)] disagreed, holding that the subsidy should not be deducted from the cost of assets. The Revenue appealed to the Income-Tax Appellate Tribunal (ITAT), which upheld the CIT(A)'s order, relying on a previous High Court decision. The ITAT referred a question of law to the High Court.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in confirming the order of the CIT(A) allowing deduction of depreciation and investment allowance (relief under section 80J) on the cost of plant and machinery without deducting therefrom the amount of subsidy received from the State Government to arrive at the 'Actual Cost' of plant and machinery as provided under section 43(1) of the Income-tax Act, 1961? Assessee's Contention: The assessee argued that the subsidy received from the State Government should not be deducted from the actual cost of plant and machinery for calculating depreciation, investment allowance, and relief under Section 80J. The assessee relied on the Gujarat High Court's decision in CIT vs. Grace Papers Industries Pvt. Ltd. Revenue's Contention: The Revenue contended that the subsidy received against the cost of machinery should reduce the cost for the purpose of granting investment allowance and depreciation. The Revenue's appeal to the Tribunal was based on this contention.

Which sections of the Income-tax Act were involved?

Section 43(1),Section 80J,Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 188 of 1993

For Approval and Signature:

Hon'ble MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements?

2.

To be referred to the Reporter or not?

3.

Whether Their Lordships wish to see the fair copy of the judgement?

4.

Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge?

-------------------------------------------------------------- COMMISSIONER OF INCOME-TAX Versus HARIHAR CRIMPERS -------------------------------------------------------------- Appearance: MR Mihir Joshi for MR BHATT for Petitioner SERVED BY RPAD - (N) for the Respondent

--------------------------------------------------------------

CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH Date of decision: 15/04/98

ORAL JUDGEMENT (Per R.K.Abichandani,J)

The Income-tax Appellate Tribunal, Ahmedabad has referred the following question for the opinion of this Court under section 256(1) of the Income-tax Act,1961. "Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in confirming the order of the CIT (Appeals), Surat allowing deduction of depreciation and investment allowance on the plant and machinery (relief under section 80J) on the cost of plant, Plant and Machinery without deducting therefrom the amount of subsidy received from State Government to arrive at the "Actual Cost" of plant and Machinery as provided for under section 43(1) of the I.T.Act ?"

2.

In the relevant assessment year, the ***darji

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