Income-tax---

----Depreciation---Written down value---Computation of written down value---Central subsidy not deductible---Indian Income Tax Act, 1961, S.32.

Held, that the Tribunal was right in holding that subsidy of Rs.1,14,995 received by the assessee from the Government of India was not deductible for arriving at the written down value of the building and plant and machinery for purposes of grant of depreciation under the Income Tax Act, 1961.

CIT v. P. J. Chemicals Ltd. (1994) 210 ITR 830 (SC) fol.

CIT v. Jindal Brothers Rice Mills (1989) 179 ITR 470 (P & H) ref.

R. P. Sawhney, Senior 'Advocate with S. K. Sharma for the Commissioner.

Nemo for the Assessee.

JUDGMENT

N. K. AGRAWAL, J.---The following question arising from the assessee's case for the assessment year 1983-84 has been referred by the Income-tax Appellate Tribunal ("the Tribunal") at the instance of the Department under section 256(1) of the Income Tax Act, 1961 (for short, "the Act"):

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the subsidy of Rs.1,14,995 received by the assessee from the Government of India was not deductible for arriving at the written down value of the building and plant and machinery for purposes of grant of depreciation under the Income Tax Act, 1961?"

The assessee had received certain money by way of Central subsidy. The Assessing Officer, while allowing depreciation on the assets, reduced the cost/written down value of the assets by the amount of subsidy. The assessee's plea was that Central subsidy had been given after the purchase of the assets for the purpose of promotion of industry. The assessee's plea was, however, not accepted. The Tribunal, however, took the view that the cost or the value of the asset cannot be reduced by the amount of subsidy while allowing depreciation on that asset. The assessee's claim was, therefore, allowed and depreciation was required to be computed without deducting the amount of subsidy from the cost of the assets

A Division Bench of this Court in CIT v. Jindal Brothers Rice Mills (1989) 179 ITR 470, took the view that the amount of Central subsidy is to be deducted from the "actual cost" under section 43(1) of the Act for the purpose of calculation of depreciation. That view has been overruled by the Supreme Court in CIT v. P. J. Chemicals Ltd. (1994) 210 ITR 830.

The Supreme Court, while deciding the controversy, observed as under (at page 841):

"On a consideration of the matter the view that commends itself as acceptable is the one which has commended itself to the majority of the High Courts. It is, of course, not the numerical strength that prevails-though the fact that a particular view has commended itself to a majority of the High Courts in the country is a matter for consideration-but the tensile strength of the acceptable logic in those decisions. It is aptly said that 'a Judge who announces a decision must be able to demonstrate that he began from recongized legal principles and reasoned in an intellectually coherent and politically neutral way to his result'. In the present case the reasoning underlying, and implicit in, the conclusion reached by the majority of the High Courts cannot be said to be an unreasonable view and on a preponderance of preferability that view commends itself particularly in the context of a taxing statute. 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'."

Since .the controversy has been finally settled, the question is answered in the affirmative and in favour of the assessee.

M.B.A./4143/FC ??????????????????????????????????????????????????????????????????????????????? Reference answered.