B.R.ARORA, J. - (1.) THE Tribunal, Jaipur Bench, Jaipur, at the instance of the Revenue, under S. 256(1) of the IT Act, has referred the following questions of law for the opinion of this Court : "Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that : (i) the amount of subsidy received by the assessee should not be deducted from the cost of assets for the purposes of allowing depreciation ? (ii) Investment allowance being special deduction under the IT Act for the purposes of computing the income, cannot be deducted from the commercial profits for the deduction under S. 80HH of the IT Act. ?"
(2.) AN identical question to question No. (i) referred above, came up for consideration before the Division Bench of this Court in the case of CIT vs. Ambica Electrolytic Capacitors Pvt. Ltd. & Ors. (1991) 91 CTR (Raj) 49 : (1991) 191 ITR 494 (Raj) : TC 29R.386 and before the Hon'ble Supreme Court in the case of CIT vs. P.J. Chemicals Ltd. (1994) 121 CTR (SC) 201 : (1994) 210 ITR 830 (SC) : TC 29R.367. For the reasons given in CIT vs. Ambica Electrolytic Capacitors Pvt. Ltd. & Ors. (supra) and CIT vs. P.J. Chemicals Ltd. (supra), question No. (i) is answered in favour of the assessee and against the Revenue. So far as question No. (ii) is concerned, the identical question came up for consideration before the Division Bench of this Court in D.B. IT Ref. No. 1 of 1991 CIT vs. Vishnu Oil & Dal Mills [since reported at (1996) 132 CTR (Raj) 132] and the Division Bench of this Court answered the question as follows : "If we read S. 80HH with S. 80AB of the Act then it is very much clear that for the purpose of determination of the relief under S. 80HH of the Act, the gross total income of the assessee has to be worked out after deducting unabsorbed loss and unabsorbed depreciation and the income eligible for deduction under S. 80HH will be the net income as computed in accordance with the provisions of the Act and not the gross income." For the reasons given in Vishnu Oil Mill's case (supra), the question No. (ii) is answered in favour of the Revenue and against the assessee.
(3.) CONSEQUENTLY , the reference is answered as under : Question No. (i) : Question No. (i) is answered in favour of the assessee and against the Revenue and it is held that the amount of subsidy received by the assessee should not be deducted from the cost of the assets for the purpose of allowing depreciation. Question No. (ii): Question No. (ii) is answered in favour of the Revenue and against the assessee and it is held that the investment allowance has to be deducted from the commercial profits for determining relief under S. 80HH of the Act.;