2007 (5) TMI 688 - HC - Income Tax

Summary

Issues involved: Interpretation of Central Subsidy under 10% Central Outright Grant Scheme 1971 for calculating investment allowance.

Summary:

Issue 1: Central Subsidy and Investment Allowance Calculation
The High Court was tasked with determining whether the Central Subsidy received by the assessed under the 10% Central Outright Grant Scheme 1971 in relation to the backward area of Parwanoo in Himachal Pradesh should reduce the cost of plant & machinery for calculating the allowable investment allowance. The Supreme Court precedent in Commissioner of Income Tax v. P.J. Chemicals Ltd. [1994]210 ITR 830(SC) was considered, where it was established that the expression "actual cost" should be interpreted liberally. The subsidy, being an incentive and not intended to meet the actual cost directly or indirectly, was deemed not deductible from the actual cost of assets. Consequently, the High Court ruled in favor of the assessed, aligning with the Supreme Court decision.

In conclusion, the High Court answered the question in the affirmative, supporting the assessed and ruling against the Revenue.