AJIT K. SENGUPTA, J. - (1.) IN this reference under s. 256(2) of the IT Act, 1961 for the asst. yr. 1984-85 the following question has been referred to this Court : "Whether, on the facts and in the circumstances of the case, and also on a proper interpretation of the provision of s. 43(1) of the IT Act, 1961, the Tribunal was correct in law in holding that Central subsidy received by the assessee would not be deductible to arrive at the actual cost of the depreciable assets?"
(2.) SHORTLY stated, the facts relating to this reference are that the assessee in the above period received capital subsidy under the Central Investment Subsidy Scheme, 1971 for setting up an industrial unit at Rai Bareli, a backward area in U.P. The AO, while working out the permissible depreciation, deducted the amount of subsidy received from the cost of assets under s. 43(1) of the said Act and allowed depreciation on the reduced amount. On appeal, the CIT (A), following the decision of Andhra Pradesh High Court in the case of CIT vs. Godavari Plywoods Ltd. (1987) 62 CTR (AP) 179 : (1987) 168 ITR 632 (AP) and that of the Madhya Pradesh High Court in the case of CIT vs. Bhandari Capacitors (P) Ltd. (1987) 65 CTR (MP) 114 : (1987) 168 ITR 647 (MP), directed the AO not to take into account the capital subsidy received by the assessee while working out 'Actual cost of assets' under s. 43(1) of the Act. The revenue being aggrieved brought the issue in appeal before the Tribunal. Before the Tribunal, the learned Departmental Representative submitted that subsidy granted by the Central Government was to reduce the cost of capital depreciable assets and, therefore, was to be taken into account. Reliance was placed on the decision of the Punjab and Haryand High Court in the case of CIT vs. Jindal Bros. Rice Mills (1989) 79 CTR (PandH) 235 : (1989) 179 ITR 470 (PandH). He relied upon the decision of the Tribunal, Calcutta Bench CIT Appeal No.956 (cal) of 1988, dt. 4th Nov., 1989) in the case of Makkar Bari Tea Co. The learned counsel for the assessee supported the order of the CIT (A).
(3.) THE Tribunal after considering the rival submissions of the parties, upheld the order of the CIT (A) with the following observations: "We have carefully considered the rival submissions, facts and circumstances of the case and material on record. We have also seen the Central Scheme under which the subsidy was granted to the business for setting up industry in backward area. As is evident from scheme subsidy was not granted on any specific asset but was allowed on costs of land, building, machinery, plant etc. THE matter in view of decisions of Andhra Pradesh and Madhya Pradesh High Courts is full covered in favour of the assessee. THE decision in the case of Makkar Bari Tea Co. Related to State Transport subsidy. In the case, subsidy was held to be a revenue receipt. Like wise, the Case of Jindal Brother Rice Mills (Supra) relates to subsidy granted by the State Government. THE subsidy schemes of State Governments are quite different from Central Subsidy Scheme with which we are concerned. THE decisions cited on behalf of the Revenue, therefore, are not applicable to the facts of the present case. THEse are distinguishable at any rate, even if two views of the matter are possible, We are inclined to take one in favour of the assessee. In other cases relating to Central Subsidy Scheme, Tribunal Benches at Calcutta have been consistently holding that the subsidy is not to be deducted while working out actual cost of depreciable assets. In line with the above view, we uphold the order of the CIT (A)." It is not in dispute that this question is now concluded by a decision of this Court in the case of CIT vs. Dewas Synthetics (P) Ltd. (1990) 90 CTR (Cal) 75 : (1991) 188 ITR 16 (Cal). Following the said decision, we answer the question in the affirmative and in favour of the assessee.;