COMMISSIONER OF INCOME TAX vs. KOTAN STONE PVT.LTD.

ITR/245/1995HC GujaratGJHC24022568199522 January 1998Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE ANIL R. DAVE3 pages
AI SummaryAllowed

What were the facts?

This case involves an Income Tax Reference No. 245 of 1995 before the High Court of Gujarat at Ahmedabad. The Revenue (Commissioner of Income Tax) challenged an order of the Income Tax Appellate Tribunal (ITAT), Ahmedabad. The ITAT had upheld the order of the CIT(A), which allowed depreciation and investment allowance to the assessee, Kotah Stone Pvt. Ltd., without reducing the actual cost of assets by the amount of subsidy received from the Government. The Revenue's appeal was dismissed by the Tribunal.

What did the High Court hold?

The High Court held that the Appellate Tribunal was right in law in allowing depreciation and investment allowance without reducing the actual cost of the assets by the amount of subsidy received by the assessee from the Government. The Court relied on the Supreme Court's decision in CIT v. PJ Chemicals Ltd., which agreed with the view that government subsidy is an incentive and does not partake of the character of a payment intended to meet the 'actual cost' of the asset. Therefore, the subsidy should not be deducted from the actual cost for computing depreciation and investment allowance. The question referred to the court was answered in the affirmative, against the Revenue and in favour of the assessee. The reference was disposed of accordingly.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that depreciation and investment allowance should be allowed without reducing the actual cost of the assets by the amount of subsidy received by the assessee from the Government? This issue turns on the interpretation of Section 43(1) of the Income Tax Act, 1961. The Revenue contended that the subsidy received by the assessee should be deducted from the actual cost of the assets before calculating depreciation and investment allowance. The assessee argued, and the Tribunal held, that the subsidy does not form part of the actual cost of the assets and therefore should not be deducted. The Tribunal relied on the High Court's decision in CIT v. Grace Paper Industries Pvt. Ltd. and the Supreme Court's decision in CIT v. PJ Chemicals Ltd.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 43(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 245 of 1995

For Approval and Signature:

Hon'ble MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE A.R.DAVE

============================================================ 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?

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 256(1)

All 370 judgments and leading authorities on Section 256(1) →

Latest GST High Court judgments

Search GST case law →