The Tax Publishers2020 TaxPub(DT) 4660 (Mad-HC) : (2021) 277 TAXMAN 0015

INCOME TAX ACT, 1961

Section 43(1)

The financial assistance rendered to the assessee, an wholly owned state government organization was treated as a loan at the instance of the bank and subsequently, pursuant to G.O.Ms.No.22, dated 03-2-2016, the amount expended was treated as an interest free loan to the assessee. Thus, Tribunal had rightly granted relief to the assessee allowing depreciation claimed against the assets acquired from the said receipts.

Depreciation - Actual cost - Applicability of Expln. 10 to section 43(1) -

Assessee an wholly-owned State Government Organization received an amount from Government of Tamil Nadu for execution of various projects. It claimed depreciation against the assets acquired from the said receipts. AO held that that the amounts so provided was in the nature of grant and that it had to be excluded from the cost of the asset as per Explanation 10 to section 43(1). Held: The wordings of the Government Order clearly showed that the amount, which was transferred to the assessee, was the financial assistance given by the bank, which would obviously show that it was a loan. Since it is an interest component, it appears that the assessee addressed to the Government and the Government, in turn, accepted the same and treated it as an interest-free loan from the Government. Therefore, in all probabilities, the assessee's liability will be only to the Government, and not to the ADB. Further, the said financial assistance rendered to the assessee was also treated as interest free loan at the instance of the bank and subsequently, pursuant to G.O.Ms.No.22, dated 03-2-2016. Thus, Tribunal rightly granted relief to the assessee allowing depreciation claimed against the assets acquired from the said receipts.

REFERRED :

FAVOUR : In favour of assessee

A.Y. : 2014-15 & 2015-16



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