COMMISSIONER OF INCOME TAX vs. D. CHANDRAKANT & BROS

ITR/64/1995HC GujaratGJHC24022389199522 January 1998Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE ANIL R. DAVE3 pages
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What were the facts?

This case involves an Income Tax Reference No. 64 of 1995 before the High Court of Gujarat at Ahmedabad. The reference was made by the Income Tax Appellate Tribunal (ITAT), Ahmedabad, for the court's opinion on a question of law. The assessee is D. Chandrakant & Bros, and the petitioner is the Commissioner of Income Tax. The dispute concerns the assessment year(s) not explicitly stated in the provided text. The ITAT had dismissed the Revenue's appeal, upholding the order of the Commissioner of Income Tax (Appeals) [CIT(A)]. The procedural history involves the ITAT's decision, which is now under challenge by the Revenue through this reference to the High Court.

What did the High Court hold?

The High Court held that the appellate Tribunal was correct in its decision. The reasoning was based on the established legal position, particularly the Supreme Court's decision in CIT v. PJ Chemicals Ltd. (210 ITR 830). The Supreme Court, in that case, agreed with the majority of High Courts, including this Court's view in Grace Paper Industries Pvt. Ltd. (183 ITR 591), that government subsidy is an incentive and does not partake of the character of a payment intended to meet the 'actual cost' of the assets. Therefore, it should not be deducted from the cost of assets for computing depreciation. The question referred to the High Court was answered in the affirmative, in favour of the assessee and against the Revenue. The reference was disposed of accordingly.

What were the issues?

1. Whether the appellate Tribunal is right in law and on facts in holding that the amount of subsidy is not to be deducted from the cost of the assets while computing depreciation? (Question of law and fact, concerning Section 43(1) of the Income Tax Act, 1961). Assessee's Contention: The judgment does not explicitly record the assessee's contentions. However, by upholding the CIT(A)'s order and the ITAT's decision, it is implied that the assessee argued that subsidy received should not be deducted from the cost of assets for depreciation purposes. Revenue's Contention: The Revenue, through its appeal to the ITAT and subsequently this reference, contended that the amount of subsidy received by the assessee should be deducted from the cost of assets before computing depreciation. The Revenue's appeal was dismissed by the ITAT.

Which sections of the Income-tax Act were involved?

Section 43(1),Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 64 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.

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