9911796707
TMI Blog1994 (6) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the case, as stated in the statement of the case drawn up by the Appellate Tribunal, are that the assessee is a limited company deriving income from manufacture and sale of caffeine. For setting up the plant for manufacture of caffeine, the assessee received a certain amount of subsidy under the Central Investment Subsidy Scheme and one of the conditions of the said scheme was that in case the assessee closed down the business within five years, the said subsidy received by the assessee will have to be refunded. In the course of assessment years 1981-82 and 1982-83, the Assessing Officer deducted the said subsidy from the cost of plant and machinery for the purpose of determining the actual cost under section 43(1) of the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsidy received by the assessee was not to be deducted from the cost of plant and machinery while determining the actual cost for the purpose of allowance of depreciation under section 43 of the Act, and (ii) pre-operative expenses and subsidy were to be included in the capital employed by the assessee for the purpose of determining the relief under section 80J of the Act. Thereafter, at the instance of the Revenue, the Income-tax Appellate Tribunal, Gauhati Bench, has referred the following two questions of law arising out of the aforesaid common order of the Tribunal in the appeal : " (1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deciding that the Government subsidy received by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaking shall first be ascertained in the manner indicated therein, and one of the assets stated in the said clause (II) is an asset which is acquired otherwise than by purchase and not entitled to depreciation. It is now a settled principle of accountancy that preliminary or project expenses incurred by an assessee before starting a business can be capitalised and treated as an asset of the assessee and we have no doubt in mind that the value of such preliminary or project expenses would fall into the said category of assets acquired by an assessee otherwise than by purchase and not entitled to depreciation and would thus have to be included in the aggregate of the value of the assets as per the aforesaid clause (II) of sub-section (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the present case, the subsidy amount cannot be deducted from the assets of the assessee while computing the capital employed in the industrial undertaking of the assessee under sub-section (1A) of section 80J of the Act for the purpose of relief to be granted on the capital employed under sub-section (1) of section 80J. In the result, our answer to the second question referred to us above is also in the affirmative and we hold that the Tribunal was justified in deciding that preliminary expenses and Government subsidy granted to the assessee were includible in the computation of the capital amount for the purpose of relief under section 80J of the Income-tax Act, 1961. In the result both the questions referred to us are answered in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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