Income-tax---

----Reference---Question of law---Question decided by High Court---Similar question may be referred---Indian Income Tax Act, 1961, S. 256.

It cannot always be said that, in all cases, though a similar question of law has been answered in an earlier case in a particular way, an identical question of law, arising in a later case, would cease to be a referable one. It may be that the question of law formulated is one governed by a Bench decision of the High Court. Even so, unless it is demonstrated that the decision on the question of law formulated is merely academic, or governed by any decision rendered by the Privy Council or the Federal Court or the Supreme court of India, it continues to be a referable question of law.

Madan (D. B.) v. CIT (1991) 192 ITR 344 (SC) fol.

CIT v. Carborandum Universal Ltd. (1985) 156 ITR 1 (Mad.); Telu Ram Raunqi Ram v. CIT (1984) 146 ITR 401 (P & H) and CIT v. K.S.R.T.C. Pension and Gratuity Fund Trust (1987) 167 ITR 383 (Ker.) no longer good law.

CIT v. Managing Trustee, Jalakhabai Trust (1967) 66 ITR 619 (SC) and CIT v. Relish Foods (1989) 180 ITR 454 (Ker.) ref.

P.K.R. Menon, Senior Advocate and N.R.K. Nair for the Commissioner.

C.M. Devan, C.N. Ramachandran Nair and Antony Dominic for the Assessee.

JUDGMENT

K. S. PARIPOORNAN, J: --The Revenue is the petitioner in this batch of three cases. The original petitions are filed under section 256 (2) of the Income Tax Act, 1961. The same assessee--a private limited company--is the respondent in all these cases. The assessee received investment subsidy from the Central Government for setting up industries in backward areas. While completing the assessment for the years 1980-81, 1981-82 and 1982-83, the Income-tax Officer deducted the investment subsidy received by ,the assessee from the cost of assets for the purpose of computing depreciation, investment allowance, and the claim under section 80 J of the Income Tax Act. In the appeal, the Commissioner of Income-tax (Appeals) held that the above subsidy received should not be reckoned or taken into account for determining the actual cost under section 43(1) of the Income Tax Act, for the purpose of depreciation, investment allowance, etc. The Revenue filed appeals before the Income-tax Appellate Tribunal (in short, "the Tribunal"). The Tribunal followed its earlier decision in Western India Plywood Ltd.'s case (I.T.A. No. 148, (Cock) of 1980, order, dated September 23, 1981), as also a circular of the Central Board of Direct Taxes in its common order, dated September 7,1987, and held that the subsidy was given only for starting industries in backward areas and it did not refer to acquisition of any machinery and so should not be taken into account for determining the actual cost under section 43(l.) of the Income Tax Act for the purpose of depreciation, investment allowance, etc. The Revenue filed applications under section 256(1) of the Income Tax Act, dated November 18, 1987, to refer certain questions of law which arose out of the Tribunal's common order, dated September 7, 1987, for the decision of this Court. The Tribunal, by its order, dated September 15, 1989, declined to refer the questions of law formulated by the Revenue for the decision of this Court. The Tribunal referred to the decision of this Court in ITR No. 310 of 1982- judgment dated March 16, 1989, reported in CIT v. Relish Foods (1989) 180 ITR 454 (Ker.) to hold that the common order passed by it in the appeals, dated September 7, 1987, is in accord with the decisions of the Division Bench of this Court referred to above. It is thereafter that the Revenue has filed this batch of three original petitions under section 256(2) of the Income Tax Act, and has formulated two questions in paragraph 7 of the original petitions, which may be directed to be referred to this Court. The questions are as follows:

"(1)????? Whether, on the facts and in the circumstances of the case, the investment subsidy is to be deducted for the purpose of depreciation, investment allowance and section 80-J, etc.?

(2)??????? Whether, on the facts and in the circumstances of the case---

(i)???????? the circular has any relevance to the issue except for the limited purpose of not treating the receipt as income;

(ii)??????? the Tribunal is justified in relying on the circular which is extraneous ?????? to the issue?"

Counsel for the assessee raised a preliminary objection and contended that no referable question of law arises in this batch of original petitions. It is true that, at this stage, in considering an application under section 256(2) of the Income Tax Act, this Court is concerned with the only aspect as to whether there is a referable question of law in the common order passed by the Tribunal: That the said question may be ultimately decided in favour of the assessee or the Revenue is of no consequence. (See CIT v. Managing Trustee Jalakhabai Trust (1967) 66 ITR 619 (SC) at page 622). But counsel for the assessee would contend that the decision rendered by the Tribunal in the appeals is in accord with the Bench decision of this Court in CIT v. Relish Foods (1989) 180 ITR 454) and so it cannot be said that there is any referable question of law in these cases. We were invited to a Bench decision of this Court in CIT v. K.S.R.T.C. Pension and Gratuity Fund Trust (1987) 167 ITR 383. In the said decision, relying on the decision of the Madras High Court in CIT v. Carborandum Universal Ltd. (1985) 156 ITR 1, this Court took the view that, in so far as the decision of the Tribunal is in accord with the view taken by this Court, even though a question of law may arise, it cannot- be stated to be a referable question of law. This was so stated, since the decision of the Tribunal is in accord with the decision of this Court and it is not possible to say that there is any error in the decision and the mere fact that a question of law is put forward will not in all cases behove the High Court to direct the Tribunal to refer the said question for the decision of this Court. A referable question of law should arise--in the sense that the question of law can be substantiated by reasonable arguments. This Bench decision rendered in Original Petition No. 611 of 1985 and reported in K.S.R.T.C. Pension and Gratuity Fund Trust's case (1987) 167 ITR 383, following the decision of the Madras High Court in Carborandum Universal Ltd.'s case (1985) 156 ITR 1, was taken up in special leave petition before the Supreme Court--SLP No. 4410 of 1988 (see (1989) 179 ITR (St) 60). A three-member Bench of the Supreme Court granted special leave and set aside the order of th4-Court and directed the question of law to be referred for the decision of this Court. So, it cannot be said that the decision of this Court reported in IC.S.R.T.C. Pension and Gratuity Fund Trust's case (1987)167 ITR 383) represents the correct position in law. There was an earlier decision of the Punjab and Haryana High Court in Telu Ram Rauniq Ram v. CIT (1984) 146 ITR 401), similar in import, to Carborandum Universal Ltd.'s case (1985) 156 ITR 1 (Mad.). There has been enlightened academic criticism that the said decision does not lay down the law correctly. See (1984) 40 CTR Journal 220 (Article by P. K. Ravindranatha Menon). That apart, the decision of the Supreme Court in D.B. Madan v. CIT (1991) 192 ITR 344 (SC) would go to show that it cannot always be said that; in all cases, though a similar question of law has been answered in an earlier case in a particular way, an identical question of law, arising in a latter case would cease to be a referable one.

In the light of the above two decisions of the Supreme Court, it cannot be said that no referable question of law arises out of the common order passed by the Tribunal. It may be that the question of law formulated is one governed by a Bench decision of this Court. Even so, unless it is demonstrated that the decision on the question of law formulated is merely academic, or governed by any decision rendered by the Privy Council, or the Federal court or the Supreme Court of India, it continues to be a referable question of law.? In this view of the matter, we allow this batch of three original petitions and direct the Tribunal to refer the questions of law formulated in paragraph 7 of the original petitions, extracted hereinabove, to this Court.

The original petitions are allowed.

M.BA./2406/T???????????????????????? ??????????????????????????????????????????????????????????? Petitions allowed.