1997 (12) TMI 132 - AT - Income Tax

Summary

Issues:
1. Reduction of subsidy from the cost of plant and machinery for calculating depreciation.
2. Deduction under section 32AB disallowed by the Assessing Officer.

Issue 1: Reduction of subsidy for calculating depreciation
The revenue appealed against the CIT(Appeals) order reducing the subsidy amount from the cost of plant and machinery for depreciation calculation. The Assessing Officer initially directed the subsidy deduction under section 43(1) of the Income-tax Act. However, the first appellate authority referred to the decision of the Gujarat High Court and ruled in favor of the assessee. The ITAT, after considering the Supreme Court decision in a similar case, rejected the revenue's appeal, stating that the issue was covered in favor of the assessee.

Issue 2: Deduction under section 32AB disallowed
The Assessing Officer disallowed a deduction of Rs. 2,34,349 under section 32AB as the payments for plant and machinery were made after the previous year. The CIT (Appeals) allowed the deduction, emphasizing that the purchases were made during the accounting year and delivery was taken before year-end. The revenue contended that actual payment during the previous year is essential for availing benefits under section 32AB. The ITAT analyzed the relevant provisions and the Investment Deposit Account Scheme, concluding that the assessee utilized income for machinery purchase during the previous year, even though payments were made later. Referring to legislative intent and judicial precedents, the ITAT upheld the CIT (Appeals) decision, dismissing the revenue's appeal.

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