Depreciation allowable on Actual Cost of Assets without reducing Subsidy

DCIT (LTU) Vs Nestle India Ltd (ITAT Delhi)

Depreciation allowable on Actual Cost of Assets without reducing Subsidy amount

Where the Government subsidy is intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries, the specified percentage of fixed capital costs, which is the basis for determining the subsidy, is only a measure adopted in the scheme to quantify the amount of subsidy and it is not a payment directly or in directly to meet any portion of the actual costs of assets. In the present case, as per the scheme of the subsidy, the same has not been received for meeting the costs of fixed asset directly or indirectly and it is only for the purposes of investment in backward areas and for generation of employment in such area. This is evident from the condition that the industry receiving the subsidy should employ 80% of the local population. Therefore, it is our considered opinion that the Ld. CIT (A) was not correct in directing the Assessing Officer to reduce the amount of subsidy from the actual cost of fixed assets and, thereafter, allow depreciation on such actual costs so arrived that. We set aside the order of the Ld. CIT (A) on this issue and we direct the Assessing Officer to allow deprecation on the actual cost of assets without reducing the amount of subsidy there from.

UPS is to be considered as an integral part of the computers for allowing depreciation  

Hon’ble Delhi High Court in the case of CIT vs. BSES Rajdhani Power Limited in ITA No.1266/2010 vide order dated 31.08.2010 and CIT vs. BSES Yamuna Power Ltd. vide order dated 31.08.2010t has held that UPS is to be considered as an integral part of the computers and depreciation is to be allowed @ 60%. Accordingly, in view of the settled legal position, we find no reason to interfere with the findings of the Ld. CIT (A) on this issue also and dismiss ground No.3 of the Department’s appeal.

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