COMMISSIONER OF INCOMET TAX vs. ROTOSCREENTECH PVT LTD

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ITR/280/1993HC GujaratGJHC24021307199315 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 Appellate Tribunal was right in law and on facts in directing the ITO to allow depreciation and investment allowance on the entire cost of the asset without deducting the subsidy received by the assessee. The Court relied on its own decision in CIT vs. Grace Papers Industries Pvt. Ltd. (183 ITR, 591) and the Supreme Court's decision in CIT vs. P.J. Chemicals Ltd. (210 ITR, 830). The reasoning was that government subsidies intended as incentives for backward areas are not payments to meet any portion of the actual cost of the asset. The subsidy amount is not to be deducted from the actual cost under Section 43(1) for calculating depreciation, development rebate, and investment allowance. The Court answered the referred question in the affirmative against the Revenue. The reference stands disposed of accordingly.

What were the facts?

The assessee, Rotoscreentech Pvt Ltd, claimed relief under Section 80J for the relevant assessment year. During the previous year, the assessee received a subsidy from the State Government against 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) held that the ITO was not justified in deducting the subsidy from the cost of assets. The Revenue appealed to the Income Tax Appellate Tribunal (ITAT), which upheld the CIT(A)'s decision, relying on a Gujarat High Court judgment. The ITAT has referred a question of law to the High Court.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in directing the ITO to allow depreciation and investment allowance on the entire cost of the asset without deducting the amount of subsidy received by the assessee? (Question of law and fact, concerning depreciation and investment allowance). Assessee's Contention: The judgment does not record specific arguments made by the assessee before the High Court. However, the Tribunal's decision, which was upheld, implies the assessee argued that subsidy should not be deducted from the cost of assets for depreciation and investment allowance. Revenue's Contention: The Revenue contended that the subsidy received against the cost of machinery should reduce the cost of the asset for the purpose of calculating depreciation and investment allowance.

Which sections of the Income-tax Act were involved?

Section 80J,Section 43(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 280 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 INCOMET TAX Versus ROTOSCREENTECH PVT LTD -------------------------------------------------------------- Appearance: MR MANISH R BHATT for Petitioner NOTICE NOT RECD BACK for Respondent No. 1 --------------------------------------------------------

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,the Appellate Tribunal is right in law and on facts in directing the ITO to allow depreciation and investment allowance on the entire cost of asset without deducting the amount of subsidy received by the assessee ?"

2.

In the relevant assessment year, the ***darji

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