Commissioner of Income Tax vs Umiam Calcinates (P.) Ltd.

D.N. Baruah, J.—In this application u/s 256(2) of the income tax Act, 1961 (''the Act''), the revenue has approached this Court with a prayer to refer the following question to this Court for its opinion : "Whether, on the facts and in the circumstances of the case, the Tribunal was not erred in holding that central subsidy should not be deducted in determining the actual cost of the assets for the purpose of allowing depreciation on the assets ?"

We have heard Mr. G.K. Joshi, the learned senior standing counsel appearing on behalf of the revenue. None appeared on behalf of the assessee.

This point has already been decided by the Apex Court in CIT v. P.J. Chemicals Ltd. [1994] 210 ITR 830/ 76 Taxman 611. The question sought to be referred relates to central subsidy as to whether central subsidy should not be deducted in determining the actual cost of the assets for the purpose of allowing depreciation. The Apex Court in the aforesaid decision observed thus:

"Where Government subsidy is intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries, the specified percentage of the fixed capital cost, which is the basis for determining the subsidy, being only a measure adopted under the scheme to quantify the financial aid, is not a payment, directly or indirectly, to meet any portion of the ''actual cost''. The expression ''actual cost'' in section 43(1) of the income tax Act, 1961, needs to be interpreted liberally. Such a subsidy does not partake of the incidents which attract the conditions for its deductibility from ''actual cost''. The amount of subsidy is not to be deducted from the ''actual cost'' u/s 43(1) for the purpose of calculation of depreciation, etc."

In view of the above decision of the Apex Court, we find no reason to refer the question as it has already been settled. The Tribunal may pass order accordingly following the decision of the Apex Court. With the aforesaid observation, this petition is disposed of.