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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 ..... Government 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson shall comply with the conditions 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 attache ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame proportion as such asset bears to all the assets in respect of 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 Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rants such land at the same price to all its grantees. In such an eventuality, the grant of such 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 cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paras 5 and 7 of this ICDS. In the year such grant is refunded: the carrying amount of the depreciable asset is increased by the grant refundable; and Depreciation is claimed on the increased carrying amount 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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