V.K. SINGHAL, J. - (1.) THE Tribunal has referred the following question of law arising out of its orders dt. 24th Nov., 1988, 7th Dec., 1988 and 3rd Aug., 1989 in respect of asst. yrs. 1983-84, 1985-86 and 1986-87 under s. 256(1) of the IT Act, 1961 : "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 s. 43(1) of IT Act, 1961 for the purpose of allowing depreciations, etc?"
(2.) THE matter with regard to the `cost', was considered by this Court with reference to the provisions of s. 43(1) in the case of CIT vs. Ambica Electrolytic Capacitors Pvt. Ltd. & Ors. (1991) 91 CTR (Raj) 49 : (1991) 191 ITR 494 (Raj). THE question that the subsidy or investment subsidy given by the Government which is for development of industries in selected backward districts/areas cannot be deducted from the actual cost for giving the benefit of depreciation or investment allowance. It was further observed that, as a matter of fact, the subsidy is a grant for encouraging entrepreneurs to come forward and develop the backward areas. As such, it cannot be deducted from the cost of the assets to the assessee for denying the benefit of depreciation or investment allowance. Following the said decision, we are of the view that 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 s. 43(1) of the IT Act, 1961, for the purpose of allowing depreciation, etc. The reference is answered in favour of the assessee and against the Revenue.;