1995 TAX. L. R. 571 ::1994 KerLJ(Tax) 570 ::(1994) 122 CurTaxRep 423 ::(1995) 213 ITR 694 ::(1994) 2 Ker LT 1071 ::(1995) ILR(ker) 1 KER 677

Kerala High Court

Hon'ble Judge(s): T. L. Viswanatha Iyer, K. K. Usha , JJ

(A) Income-tax Act (43 of 1961) , S.32. — Depreciation - Machinery - Subsidy received by assessee from Central Govt. - cannot be deducted to arrive at cost of machinery in computing depreciation. 1990 Tax LR 570 (Kerala), Rel. on. (B) Income-tax Act (43 of 1961) , S.37— Business expenditure - Assessee following mercantile system of accounting - Provision made for sales tax liability on apprehension that because of the view taken by High Court and sales tax Department exemption claimed by assessee was likely to be rejected - Said provision for tax was allowable as business expenditure - Fact that subsequently Supreme Court accepted assessee's claim of exemption would not make assessee's apprehension or action of making provision unjustified. A provision in the accounts made by an assessee following the mercantile system of accounting, for liability to sales tax, (though disputed) as assessee thought that it was entitled to exemption is yet liable to be allowed as business expenditure, if there was a bona fide reasonable apprehension on the part of the assessee that the amount will become payable. Of course, it is not every fanciful claim, based on the ipsi dixit of the assessee that could form the basis of any claim for deduction of such liability. Hence, where the assessee having reg....