Depreciation in income tax

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Mohammad Taha (Querist)

16 November 2014 if government grant is received on an fixed assets, what is its treatment for calculating depreciation. whether it is reduced from block as like sale for calculating depreciation. whether there is any provision in respect of this in income tax act.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)

19 November 2014 Explanation 10 to Section 43(1) of the Income Tax Act provides that Where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or a State Government or any authority established under any law or by any other person, in the form of a subsidy or grant or reimbursement (by whatever name called), then, so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee

In this case the subsidy received from the Govt. will be reduced from the cost of the asset & depreciation will be admissible on the reduced amount.

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