COMMISSIONER OF Income Tax vs STEEL TUBES OF INDIA (P.) LTD.

G. G. SOHANI, ACTG. C.J. - By this reference u/s 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), the Income Tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the capital subsidy of Rs. 8,23,287 should not have been deducted from the cost of the fixed assets ?"

The material facts giving rise to this reference, briefly, are as follows :

While framing the assessment for the assessment year 1976-77, the Income Tax Officer had deducted the capital subsidy received by the assessee from the cost of fixed assets for the purpose of allowing depreciation. Aggrieved by the order passed by the Income Tax Officer, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), but the appeal was dismissed. The assessee then filed a second appeal before the Tribunal. The Tribunal upheld the claim of the assessee and held that the amount of capital subsidy was not deductible in computing the actual cost of the asset for the purpose of calculating depreciation. Aggrieved by the order passed by the Tribunal, the Revenue sought reference and it is at the instance of the Revenue that the aforesaid question of law has been referred to this court for its opinion.

At the time of hearing, learned counsel for the parties connected that the matter arising in this case is covered by a decision of this court in COMMISSIONER OF Income Tax Vs. BHANDARI CAPACITORS PRIVATE LTD., . Following that decision, therefore, it must be held that, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the capital subsidy of Rs. 8,23,287 received by the assessee should not have been deducted from the cost of the fixed assets.

Our answer to the question referred to this court, is, therefore, in the affirmative and against the Revenue. In the Circumstances of the case, parties shall bear their own costs of this reference.