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TMI Blog1985 (10) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... dy Scheme, 1971 was not to be reduced from the cost of the assets owned by the assessee-company under section 43 of the Income-tax Act, 1961 ? " The petitions were filed in the following circumstances. The assessee, in both the petitions, Ravindra Tube Limited, had set up an industrial unit in a selected backward district/area and was entitled in terms of "10 per cent. Central Outright Grant or Subsidy Scheme, 1971 ", to 10% grant or subsidy by the financial institutions/state government, during the two previous years corresponding to the assessment years 1977-78 and 1978-79. The assessee received amounts of Rs. 3,91,275 and of Rs. 3,57,907, respectively, as subsidy in terms of the aforesaid Scheme. The Central Board of Direct Taxes, vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was received and also because the subsidy was in relation to some other purpose. " We have heard learned counsel for the Revenue and the assessee. By its notification of August 26, 1971, the Central Government promulgated the " 10% Central Outright Grant or Subsidy Scheme, 1971 " for industrial units " to be set up " in selected backward districts/areas. According to para 3 of the Scheme, it is applicable to industrial units in selected districts/areas as defined in the Scheme other than those whose total fixed capital investment would exceed Rs. 50 lakhs. Clause 4(f) of the Scheme defines the expression " fixed capital investment ", as meaning, investment on land, building, plant and machinery. Sub-clause (3) of this clause, which deals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation even on those assets which were " linked with the subsidy received from the Government ". The assessment order, however, gave no indication as to how the assets in respect of which depreciation was claimed were linked with the subsidy received from Government. In appeal, the Commissioner of Income-tax posed the question whether the cost of any of the assessee's fixed assets was met, directly or indirectly, within the meaning of section 43(1) of the Act by the Government as a result of the subsidy granted to the assessee. The Commissioner then noted the preamble to the Scheme that subsidy was meant for industrial units " to be set up " in certain selected areas with view to promoting the growth of industry there, and observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e financial year. We asked learned counsel for the assessee to file a copy of the assessee's application for the grant and of the correspondence exchanged between the parties as also copy of the mortgage deed that may have been executed by the assessee in favour of the Government in terms of the Scheme. The assessee filed compilation of documents consisting of the aforesaid copies. A copy of the order of this court in the case of Jindal Industries was also filed. The mortgage deed executed by the assessee in favour of the financial institution, inter alia, recites that the company required money for the purchase of machinery and construction of factory building, and that the assessee guarantees utilisation of the amount of subsidy for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etation of the Scheme to determine if the subsidy could be utilised merely for the purpose of meeting the working capital requirements of the recipient. While we express no opinion as to how these questions may be eventually answered in view of the peculiar Scheme of section 256(2) of the Act, there is no escape from the conclusion that the question sought to be referred is a question of construction and does arise on the facts and circumstances of the case. We would, therefore, accept these petitions and direct the Tribunal to state a case and refer the following questions to this court : " (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the subsidy as received by the assessee comp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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