1999 PLP 2458 (PTD)

P. VENKATARAMA REDDI, J.

The Revenue sought reference of the following two questions for the opinion of this Court: "(1) Whether, on the facts and in the circumstances of the case, the income-tax Appellate Tribunal ought to have held that capital subsidy granted by the Central Government to the company to the extent of Rs.11,25,000 was intended to meet the actual cost of the assets of the company within the meaning of section 43(1)? (2) Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal has basis or material for holding-that there was no direct or indirect nexus between the subsidy and the cost of acquisition of capital asset?" The Tribunal declined reference on the- ground that the decision of this Court in CIT v. Godavari Plywoods Ltd: (1987) 168 ITR 632, squarely covers the questions raised in the reference application. In that decision, the Division Bench consisting of Justice B. P. Jeevan Reddy and Justice Y. V. Anjaneyulu referred to the Central Subsidy Scheme and held that the subsidy scheme with which we are concerned here was formulated to encourage and induce entrepreneurs to move to backward areas and to establish industries there. The learned Judges also observed that there is nothing in the Central Subsidy Scheme to indicate that the entrepreneurs were granted the subsidy for the specific purpose of meeting a portion of the cost of the assets. No doubt, the actual subsidy is quantified by determining the specified percentage of the capital asset. "The specified percentage of the fixed capital cost taken as the basis for determining the subsidy is only a measure adopted under the scheme to quantify the subsidy". The Division Bench, therefore; held that the subsidy cannot be deducted from the actual cost of the assets of the assessee as per section 43(1) of the Income-tax Act. It is brought to our notice that the S.L.P. filed against the said decision was dismissed. The learned additional standing counsel Mr. D. Srinivas, appearing for the petitioner, submits that the decision of, this Court requires reconsideration in view of the fact that certain factual aspects bearing on the true nature of the subsidy were not taken into account in that decision. In order to substantiate his contention learned counsel has drawn our attention to the order of the Commissioner (Appeals), dated February 20, 1984. The Appellate Commissioner referred to the letter addressed by the Joint Secretary to the Government of Andhra Pradesh (Industries and Commerce Department) to the Secretary, Federation of A.P., Chamber of Commerce and Industry, Hyderabad, offering clarification regarding the nature of subsidy granted under the incentive schemes. It was mentioned in that letter that the subsidy or other financial concessions under the incentive scheme were intended to be a contribution towards capital outlay of the industrial units and the payments made in this regard was in the nature of capital receipt in the hands of recipient industrialists. Apart from the fact that the contents of the said letter were not relied upon by the Department before the Tribunal nor even in the reference application, we do not think that the view expressed by the Joint Secretary of the state Government, even assuming that it relates to Central Subsidy, outweighs the interpretation placed by this Court on the Central subsidy Scheme. We, therefore, do not see any referable questions. The income-tax case is accordingly dismissed. No costs. M.B.A./2088/FC ??????????????????????????????????????????????????????????????????? Application dismissed.