Law: Income Tax Act, 1961

Section: 256(2),43(1)

Income-tax--- ----Reference---Question of law---Depreciation---Actual cost---Not to be reduced by capital subsidy received by assessee from Central Government--­No question of law arises for reference---Indian Income Tax Act, 1961, Ss.32, 43(1) & 256(2). Capital subsidy received by the assessee should not be deducted from the value of the assets while working out the cost for allowing depreciation. No question of law arises for reference. CIT v. P.J. Chemicals Ltd. (1994) 210 ITR 830 (SC) fol. CIT v. Janak Steel Tubes (Pvt.) Ltd. (1989) 179 ITR 536 (P & H) and CIT v. Jindal Brothers Rice Mills (1989) 179 ITR 470 (P&H) ref. JUDGMENT G. S. SINGHVI, J. ---In all these petitions filed under section 256(2) of the Income Tax Act, 1961, by the Revenue, a prayer has been made for directing the Income-tax Appellate Tribunal to refer the question of law as to whether the Tribunal has been right in law in holding that the capital subsidy received by the assessee should not be deducted from the value of the assets while working out the cost for allowing depreciation. . For the purpose of this order, it will be sufficient to give a brief factual background of Income Tax Case No.37 of 1989. The respondent-assessee is a private limited company incorporated on January 4, 1974. It is engaged in the business of milling wheat, suji, atta, etc., and selling them in the market. During the assessment year 1978-79, the assessee has claimed that the amount of subsidy received under the Central Investment Subsidy Scheme is not to be deducted from the total assets for the purpose of allowing depreciation under the Act. This contention did not find favour with the assessing authority which held that the amount of subsidy should be deducted from the value of assets while calculating the depreciation. The appeal filed by the assessee was accepted by the Commissioner of Income-tax (Appeals), Chandigarh, who directed the Inspecting Assistant Commissioner (Assessment) to allow depreciation on machinery and plant without reducing the cost of subsidy form the actual cost of plant and machinery. Feeling dissatisfied with the order of the Commissioner of Income-tax (Appeals), the…

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