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Issues Involved:
1. Deduction of Government subsidy from the written down value of assets for computing depreciation. 2. Allowability of the contribution to the Gujarat Co-operative Education Fund as a deduction. 3. Entertaining additional ground of appeal relating to computation of capital u/s 80J. 4. Deduction of subsidy from the value of depreciable assets for computing capital employed u/s 84/80J. Summary: Issue 1: Deduction of Government Subsidy from Written Down Value of Assets The Tribunal held that the Government subsidy of Rs. 15,25,000 should be deducted from the written down value of the assets for computing depreciation on the milk plants at Anand and Mehsana for the assessment years 1967-68 to 1972-73. The Tribunal reasoned that the actual cost to the assessee was reduced by the portion of the cost met directly or indirectly by the Government. The High Court, however, remanded the matter back to the Tribunal for determining whether depreciable and non-depreciable assets were purchased from the loan and to what extent, as the loan was for the entire project and not just for plant and machinery. Issue 2: Contribution to Gujarat Co-operative Education Fund The Tribunal rejected the assessee's claim for deduction of the contribution to the Gujarat Co-operative Education Fund, considering it as an appropriation of profits rather than a business expenditure. The High Court disagreed, holding that the contribution was a statutory obligation necessary for declaring dividends at a rate higher than three percent, which was in the interest of the assessee's business. Thus, it was considered a legitimate business outgoing and allowable as a deduction u/s 37. Issue 3: Additional Ground of Appeal u/s 80J The Tribunal declined to entertain the additional ground of appeal relating to the computation of capital u/s 80J for the assessment years 1967-68 to 1972-73. The High Court did not address this issue as the assessee did not press it, citing the Supreme Court's judgment in Lohia Machines Ltd. v. Union of India. Issue 4: Deduction of Subsidy for Computing Capital Employed u/s 84/80J The Tribunal held that the subsidy of Rs. 15,25,000 should be deducted from the value of the depreciable assets for computing capital employed in the business undertaking of the assessee for the purpose of section 84/80J. The High Court declined to answer this question as it was dependent on the resolution of Issue 1. Conclusion: The High Court remanded Issue 1 back to the Tribunal for further examination, answered Issue 2 in favor of the assessee, did not address Issue 3 as it was not pressed, and declined to answer Issue 4 as it was dependent on Issue 1. The reference was disposed of with no order as to costs.
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