Madhya Pradesh High Court
Commissioner Of Income-Tax vs Sakti Auto Industries on 1 February, 1989
Equivalent citations: [1989]177ITR395(MP)
JUDGMENT
G.G. Sohani, Actg. C.J.
1. By this reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), the Income-tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion :
"Whether, on the facts and in the circumstances of the case and in view of Section 43(1), the Tribunal is justified in holding that the amount of subsidy received by the assessee from the Government would not go to reduce the cost of the assets for the purpose of allowing depreciation ? "
2. The material facts giving rise to this reference, briefly, are as follows :
The order of assessment passed by the Income-tax Officer for the assessment year 1982-83 was assailed by the assessee before the Appellate Assistant Commissioner on the ground that the Income-tax Officer had erred in holding that while allowing depreciation, the amount of capital subsidy received by the assessee was liable to be deducted from the cost. The Appellate Assistant Commissioner upheld the order passed by the Income-tax Officer. On further appeal before the Tribunal, the Tribunal accepted the claim of the assessee that the amount of capital subsidy was not liable to be deducted from the cost of the assets for allowing depreciation. Aggrieved by the order passed by the Tribunal, the Revenue sought reference and it is at the instance of the Revenue that the aforesaid question of law has been referred to this court for its opinion.
3. At the time of hearing, learned counsel for the parties conceded that the matter arising in this case is covered by a decision of this court in CIT v. Bandar Capacitors Private Ltd.[1987] 168 ITR 647, In that case, it has been held that the amount of capital subsidy is not deductible in computing the actual cost of the assets for the purpose of calculating depreciation admissible to the assessee. Following that decision, therefore, it must be held that on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amount of subsidy received by the assessee from the Government would not go to reduce the cost of the assets for the purpose of allowing depreciation.
4. For all these reasons, our answer to the question referred to this court is in the affirmative and against the Revenue. In the circumstances of the case, parties shall bear their own costs of this reference.