2000 (3) TMI 50 - HC - Income Tax

Summary

Issues involved:
The judgment involves questions regarding the deduction of premium payable on debentures, treatment of cash subsidy received, and computation of depreciation and investment allowance.

Deduction of Premium on Debentures:
The Tribunal was directed to refer questions regarding the deduction of premium on debentures. The main dispute was whether the premium payable on debentures should be allowed in the year of redemption or spread over the term of the debentures. The apex court's decision in Madras Industrial Investment Corporation Ltd. v. CIT was cited, stating that the liability should be spread over the period of the debentures. The court held that the deduction should be allowed on a proportionate basis over the term of the debentures.

Treatment of Cash Subsidy Received:
Another issue was the treatment of cash subsidy received on a generator. The question was whether the cash subsidy should be deducted from the cost of the asset for the purpose of computing depreciation and investment allowance. Citing the decision in CIT v. P. J. Chemicals Ltd., it was argued that the subsidy should not be deducted from the actual cost of the asset for depreciation purposes. The Revenue contended that the subsidy should be treated as a revenue receipt based on the decision in Sahney Steel and Press Works Ltd. v. CIT. However, the court held that the subsidy should not be deducted from the cost of the asset for depreciation and investment allowance.

Conclusion:
In R. A. No. 580(Cal) of 1995, the court answered that the deduction of premium on debentures should be allowed on a proportionate basis over the term of the debentures. Regarding the cash subsidy, the court ruled in favor of the assessee against the Revenue. In R. A. No. 581(Cal) of 1995, the deduction of premium on debentures was also allowed on a proportionate basis, and the court ruled against the Revenue on the cash subsidy issue. In R. A. No. 582(Cal) of 1995, the assessee was entitled to spread the deduction of premium over the term of the debentures. The application was accordingly disposed of with all parties to act on the operative part of the judgment.