V.K. Singhal, J. - (1.) THE Income-tax Appellate Tribunal has sent these references under Section 256(1) of the Income-tax Act, 1961, along with the statement of cases and the question of law arising out of the order of the Income-tax Appellate Tribunal is as under : " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amount of Central Government subsidy is not deductible from the money cost to the assessee of its plant, machinery and building while computing the original cost thereof under Section 43(1) of the Income-tax Act, 1961, for the purpose of allowing depreciation or investment allowance, etc. ? "
(2.) IN these cases, the assessees have received Central Government subsidy during the previous year relating to the assessment year under consideration. The INcome-tax Officer, while completing the assessment, deducted the amount of subsidy so received from the cost of plant and machinery, building, etc., for the purpose of granting depreciation and investment allowance under Section 32 of the INcome-tax Act, 1961. Arguments of Mr. Shishodia, standing counsel for the Department, were heard. The matter stands concluded by the decision of the Rajasthan High Court in CIT v. Ambica Electrolytic Capacitors Pvt. Ltd, [1991] 191 ITR 494, in which their Lordships have held that the subsidy is a grant for encouraging entrepreneurs to come forward and develop the backward areas and as such cannot be deducted from the cost of the assets of the assessees for denying the benefit of depreciation or investment allowance. Following the said decision, the references are answered in the negative and in favour of the assessees.;