capital subsidy

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Querist : Anonymous

Querist : Anonymous (Querist)

01 August 2010 capital subsidy recd in 1994-95 still appearing in reserve & surplus.value of assets not reduced for purpose of depreciation. In scruitny procedings of a.y.2008-09 DCIT is raising question for not reducing the value of assets.what is suitable reply and action

Sunil

Sunil (Expert)
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01 August 2010 Better check. After a supreme court hearing allowing it as capital receipt, in the very next budget the FM changed it to legally make it reduction in asset value for calculation of depreciation. However there was no retrospective effect. Therefore you better try and get budget speeches for all years after 1990-91 and see exactly when this was done.

To re open your case, DCIT will have to take permission from CBDT as it is below 16 years but above 10. Better check your ledger accounts and see whether adjustments have been made for reducing asset value if indeed it was applicable in that assessment year and verify all dates and amount involved.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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01 August 2010 The following case laws may be referred before drafting the reply.
1)CIT Vs P.J Chemicals Ltd (1994) 210 IT 830 (SC).
2) CIT Vs Ponni Sugars & Chemicals Ltd & Ors (2008) 219 CTR 105(SC).
Further explanation 10 to section 43 (1) of the Income tax Act,1961 inserted through Finance (No.2) Act,1998 w.e.f 1-4-1999 also to be examined.

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