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TMI BlogICDS VII : Government GrantsX X X X Extracts X X X X X X X X Extracts X X X X ..... nt which may be chargeable to tax under other heads. It would also exclude Government grants received or receivable by Charitable trusts (which are governed by sections 11 to 13). 1. Scope:- This ICDS deals with income-tax treatment of Government grant. The Government grants are sometimes called by other names such as subsidies, cash incentives, duty drawbacks, waiver, concessions, reimbursements, etc. The ICDS excludes the following two forms of government aids: * Government assistance other than in the form of Government grants; and * Government participation in ownership of an enterprise. The term 'Government' is defined to mean Central or State government including 'forms and organs' of the government, be it national, provincial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns attached to them, and (ii) the grants shall be received. Both the conditions have to be cumulatively satisfied to recognise the government grant as income. The phrase 'reasonable assurance' has also not been defined by the ICDS. It connotes something which has a sufficient degree of certainty. Recognition of Government grant shall not be postponed beyond the date of actual receipt. The Government grant has to be recognised on or before the date of receipt. Asset specific grants: Grants related to assets are government grants whose primary condition is that an entity qualifying for them should purchase, construct or otherwise acquire long-term assets. Subsidiary conditions may also be attached restricting the type or location of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or with reference to which the Government grant is so received, shall be deducted from the actual cost or written down value of the asset. Thus, where a government grant is not directly relatable to depreciable fixed asset acquired, the total grant has to be apportioned over the various assets to reduce their cost proportionately. The amount to be reduced from the actual cost or written down value can be computed in the following manner: Amount to be reduced from actual cost/ written down value = (A x B)/C Where A = Value of the asset acquired; B = Total government grant received or receivable; and C = Sum of all assets in respect of or with reference to which Government grant is received. The same treatment is applicable in case of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch land is not an income in the hands of the allottees. The allottees should not look at the market rate to compute the concession but the price at which such lands are granted by the body in its normal course. 4. Refund of Government Grants:- (a) Government grants sometimes become refundable because the attached conditions are not fulfilled. Refund of government grants would require reversal of treatment carried out at the time of its initial recognition. The ICDS requires that in the event of reversal of government grant, it has to be first applied to unamortized deferred credit. If the amount so refundable exceeds any such deferred credit, or where no deferred credit exists, the amount is charged to profit and loss statement. Refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t over the remaining useful life of the asset prospectively. (c) The ICDS does not prescribe the treatment of refund for grants in relation to the following: * Grants which are not directly relatable to acquisition of non-depreciable assets; and * Grants in relation to non-monetary assets. 5. Transitional Provisions:- All the Government grants which meet the recognition criteria of para 4 on or after 1st day of April, 2016 shall be recognised for the previous year commencing on or after 1st day of April, 2016 in accordance with the provisions of this standard after taking into account the amount, if any, of the said Government grant recognised for any previous year ending on or before 31st day of March, 2016. 6. Disclosures:- Bro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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