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TMI Blog2008 (1) TMI 485X X X X Extracts X X X X X X X X Extracts X X X X ..... 1994 (9) TMI 1 - SUPREME COURT] still holds the expression met directly or indirectly to come to the conclusion that only in a case where a subsidy or other grant was given to offset the cost of an asset, such payment/grant would fall within the expression 'met', whereas the subsidy received merely to accelerate the industrial development of the State cannot be considered as payments made specifically to meet a portion of the cost of the assets. we are of the view that the incentive in the form of subsidy cannot be considered as a payment directly or indirectly to meet any portion of the actual cost and thus it falls outside the ken of Expln. 10 to s. 43(1) of the Act. Thus, we are of the view that for the purpose of computing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so that the assessee would get lesser depreciation than what was claimed in the return. The case of the assessee was that the subsidy was not given to acquire any asset either directly or indirectly and thus it need not be considered for calculation of depreciation. He further contended that subsidy was calculated based on the investment made by the assessee for establishing the unit and there is no embargo on the utilization of the subsidy in which event it cannot be said that the subsidy was directly relatable to the cost of the assets. 3. The AO was, however, of the opinion that G.O. Ms. Nos. 117 and 108, dt. 17th March, 1993 and 20th May, 1996 respectively, issued by the Andhra Pradesh State Government provides subsidy calculated at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Government in the form of a subsidy, then, so much of the cost as is relatable to the subsidy, shall not be included in the capital cost of the asset. He further noticed that the amount received in the form of subsidy was paid to the banker for repayment of term loan taken by the company on the purchase of the capital assets which makes it further clear that the subsidy given by the Government was used to offset the capital costs and thus the same has to be reduced from the cost of the fixed assets. He accordingly apportioned the subsidy amount against the opening WDV of the assets of the assessee and calculated the eligible depreciation. 5. Aggrieved, it was contended before the CIT(A) that the incentive scheme which was considered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost of the capital assets purchased by the assessee. On the other hand, the scheme under which the assessee was granted subsidy and the schemes which were considered by the Supreme Court as well as the Andhra Pradesh High Court in the cases cited supra were identical and the main purpose under both the schemes was to give a fillip to the entrepreneurs who establish new industrial units in eligible notified areas and for the purpose of working out the amount of subsidy to be given fixed capital investment was considered, but the fact remains that there is an outer ceiling of Rs. 20,00,000 irrespective of the capital investment which only goes to show that the subsidy was not meant to offset the cost of the assets. He has adverted our attenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the cost of the capital or was intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries, the specified percentage of the fixed capital cost which is the basis for determining the subsidy being only a measure adopted under the scheme to quantify the financial aid. The contention is that it is not a payment, directly or indirectly, to meet any portion of the 'actual cost' but intended as an incentive to entrepreneurs, its quantification determined at a percentage of the fixed capital cost." At p. 841 of the report, their Lordships further observed as under: "The Government subsidy, it is not reasonable to say, is an incentive not for the specific purpose of meeting a portion of the cost of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rized as eligible areas. Further, the utilization of the subsidy amount for the purpose of repayment of term loan is also a pointer in support of the contention of the Revenue that the subsidy amount has helped in reduction of the cost of the assets. He thus submitted that the decisions cited supra are not applicable to the facts of the case. 11. We have carefully considered the rival submissions and perused the record. In our considered opinion, even after insertion of Expln. 10 to s. 43(1) of the Act, the basic principle underlying in the decision of the apex Court in the case of P.J. Chemicals Ltd. still holds the field. Their Lordships analyzed the expression "met directly or indirectly" to come to the conclusion that only in a case w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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