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TMI Blog1999 (12) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of the plant and machinery received from Indian Dairy Corporation? - (iii) Whether, on the facts, the Appellate Tribunal was right in law in holding that 30 percent of value of the plant and machinery received from Indian Dairy Corporation was not to be included in the computation of the capital employed for the purpose of granting relief under section 80J?" - - - - - Dated:- 24-12-1999 - Judge(s) : B. C. PATEL., K. M. MEHTA. JUDGMENT At the instance of the assessee, the present reference is made before this court where in the following questions have been referred: "(i) Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in law in holding that the contribution paid as per the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment years 1967-68 to 1972-73?" The contribution was in compliance with section 69 of the Gujarat Cooperative Societies Act, 1961. The relevant provision of section 69 reads as under: "Every society which declares out of current year's profit, a dividend to its members at the rate of 30 percent or more, shall contribute towards the educational fund of the Gujarat State Co-operative Union at such rate as may be prescribed." Rule 31 of the Gujarat Co-operative Societies Rules, 1965, lays down the rates at which the society was required to contribute. Reading the provisions under section 69(1) of the Act and rule 31 of the Gujarat Co-operative Societies Rules, 1965, it transpires that it was the duty of the co-operative socie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the reasons given by the Madras High Court as we are of the opinion that the contribution made by the assessee to the co-operative education fund is an allowable deduction under section 37 of the Act." The Division Bench considered the provisions of law and held that: "Thus, the assessee's claim for deduction was under section 37 of the Act and when its claim is decided on the merits, it would not be proper to reject that claim only on the ground that the assessee had not made a specific claim in that behalf by reference to section 37 of the Act." The court held that the Tribunal was not right in holding that such contribution did not amount to a legitimate business outgoing. It is required to be noted that the payment was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied 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 Act 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" under section 43(1) for the purpose of calculation of depreciation, etc. The Tribunal appears to have been guided by the view that depreciation should be allowed only on "actual cost" to the assessee. The Tribunal's order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assets of the assessee to the extent of Rs. 10,92,237 being the amount given to it by the Gujarat Government by way of grant and loan should be taken into account in computing the capital employed by it for the purpose of section 80J of the Income-tax Act, 1961?" Considering the provisions of law, the court partly answered the question in the affirmative and partly in the negative by holding that the written down value of the assets of the assessee to the extent of the amount received by it as grant from the Government should not be taken into account in computing the capital employed by it for the purpose of section 80J, whereas the loan amount is required to be taken into account. In other words, question No. 1 in so far as it relate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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