Income-tax---

----Subsidy received from Government---Reduction of subsidy amount from the actual cost of assets for the purposes of depreciation etc.---Validity-- Assessee company received substantial subsidy during the relevant accounting year and the Assessing Authority in consequence of such receipt reduced from the actual cost of the assets the amount of such subsidy for the purpose of computing depreciation, development rebate etc.---Assessee succeeded in getting the order reversed in appeal before the Commissioner of Income Tax which order was further confirmed in appeal before Tribunal---Question whether the subsidy received by the assessee from the Government could be deducted from the cost of the assets to arrive at the actual cost of the assets was referred to High Court for answer ---Held, the subsidy received from the Central Government could not be deducted from the cost of the assets for the purpose of depreciation etc.---There being conflict of view on the question between different High Courts and the amount of subsidy being substantial, High Court anted certificate of fitness for appeal to Supreme Court.

JUDGMENT

K.S.PARIPOORNAN, J.---These are connected cases. These petitions are filed by the Revenue under section 261 of the Income Tax Act, 1961, praying for the issue of a certificate to appeal to the Supreme Court against the common judgment rendered by this Court in I.T.Rs. Nos. 152 and 153 of 1985, dated 21st June, 1989.

2. The respondent is an assessee to income-tax. The respondent/assessee company received substantial subsidy during the relevant accounting years. The assessing authority reduced, from the actual cost of the assets, the subsidy received from the Central Government for the purpose of computing depreciation, development rebate, etc. In appeal, the Commissioner of Income-tax (Appeals) reversed the said decision. He held that the subsidy received from the Central Government cannot be reckoned for the purpose of computing the depreciation and development rebate and in computing the actual cost price of the assets. The Appellate Tribunal concurred with the said order. At the instance of the Revenue, the question whether the subsidy received by the assessee from the Central Government can be deducted from the cost of the assets to arrive at the actual cost of the assets, was referred for the decision of this Court.

A Bench of this Court, in delivering the judgment in ITR No.310 of 082, dated 16th March, 1989 CIT v. Relish Foods (1989) 180 ITR 454, held that the subsidy received from the Central Government cannot be deducted from the cost of the assets for the purpose of allowing depreciation, development rebate and deduction under section 80J of the Income-tax Act. The Revenue filed an application, ITR No310 of 1982, under section 261 of the Income-tax Act praying for the issue of a certificate to appeal to the Supreme Court. In that case, it was agreed that the amount of tax involved was small and we declined to grant the certificate to appeal to the Supreme Court. In these two cases, the subsidy received exceeds Rs.7,73,000 and its impact on the tax will be substantial. It was also brought to our notice that, apart from the decisions relied on by us in ITR No.310 of 1982 and (1989) 180 ITR 454, a Subsequent decision of the Punjab and Haryana High Court in CIT v. Tindal Brothers Rice Mills (1989) 179 ITR 470, has taken a different view holding that the subsidy amount received by an assessee would go to reduce the cost of the asset for the purpose of allowing depreciation, development rebate, etc. This decision was, brought to our notice to stress the fact that the aforesaid decision was not available when this Court rendered its decision in ITR No.310 of 1982 (1989) 180 ITR 454 and also the fact that, on the question of law that arises for consideration, there are conflicting views expressed by different High Courts.

In view of the above, we are satisfied that these two cases are fit for appeal to the Supreme Court of India and we grant a certificate accordingly.

M.BA./1747/T Order accordingly.