V.K. SINGHAL, J. - (1.) THE Tribunal has referred the following question of law arising out of its order dt. 16th June, 1987, in respect of asst. yr. 1983-84 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 directing the ITO not to deduct the amount of subsidy from the money cost of plant and machinery for the purpose of depreciation?"
(2.) THE above controversy is settled by the decision of the apex Court in the case of CIT vs. P.J. Chemicals Ltd. (1994) 121 CTR (SC) 201 : (1994) 210 ITR 830 (SC) wherein it was observed : "THE expression `actual cost' needs to be interpreted liberally. THE subsidy of the nature we are concerned with, does not partake of the incidents which attract the conditions for their deductibility from "actual cost". THE Government subsidy, it is not unreasonable to say, is an incentive not for the specific purpose of meeting of a portion of the cost of the assets, though quantified as or geared to a percentage of such cost. If that be so it does not partake of a character of a payment intended either directly or indirectly to meet the "actual cost". We should prefer the reasoning of the majority of the High Courts to the one found acceptable by the High Court of Punjab & Haryana". In view of the above observation of the apex Court, we are of the opinion that the Tribunal was justified in directing the ITO not to deduct the amount of subsidy from the money cost of plant and machinery for the purpose of depreciation. Accordingly, the reference is answered in favour of the assessee and against the Revenue. No order as to costs.;