1982 (9) TMI 29 - HC - Income Tax

Summary

Issues involved:
The issues involved in the judgment are whether the assessee is entitled to depreciation on assets purchased with a grant from the Government, and whether the grant given by the Government should be considered as a contribution by another person or authority.

Depreciation on assets acquired with grant:
The assessee, a co-operative society, received a grant from the Government of Uttar Pradesh for specific capital items. The Income Tax Officer treated the grant as income, but the Appellate Authority held it to be a capital receipt. However, the Authority directed that the grant amount should be deducted from the cost of assets for depreciation calculation. The Tribunal was requested to refer two questions to the High Court, including whether the grant could be considered a gift for depreciation purposes. The High Court analyzed Explanation 2 to section 43(1) of the Income Tax Act, stating that it applies to assets acquired by gift or inheritance, not to grants of money. The Court concluded that the grant cannot be considered a gift and upheld the Revenue's position.

Interpretation of "authority" in section 43(1):
The assessee argued that the term "authority" in section 43(1) does not include the Government of a State. The High Court examined various definitions of "authority" and concluded that it has a wide meaning encompassing constitutional, governmental, or statutory authorities. The Court held that the term "authority" in section 43(1) includes the Government of Uttar Pradesh. Therefore, the Court ruled against the assessee's contention that the Government should not be considered an authority under the Act.

Conclusion:
The High Court answered the questions in favor of the Revenue and against the assessee. The Court held that the grant from the Government cannot be considered a gift for depreciation purposes and that the term "authority" in section 43(1) includes the Government. The assessee was directed to pay costs of Rs. 250.