JUDGMENT
1. At the instance of the Revenue, the Income-tax Appellate Tribunal has referred the following question of law for the decision of this court:
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the subsidy received from the Central Government is not to be deducted from the cost of the assets to arrive at the actual cost to the assessee of the assets ?”
2. The respondent is an assessee to income-tax. The matter arises for the assessment years 1975-76 and 1976-77. For both the years, the assessing authority reduced from the actual cost of the assets the subsidy received from the Central Government for the purpose of computing depreciation and development rebate in the case of the assessee, In appeal, the Commissioner of Income-tax (Appeals) followed the decision of the Appellate Tribunal in Relish Sea Foods’ case (I. T. A. Nos. 333 to 335 (Coch.) of 1980 dated November 25, 1981) and held that the Income-tax Officer was not justified in doing so. According to the Commissioner of Income-tax (Appeals), the subsidy received from the Central Government should not be reckoned for the purpose of computing the depreciation and development rebate and in computing the actual cost price of the assets. The Revenue appealed before the Appellate Tribunal. The Appellate Tribunal, in the light of its earlier orders passed in I. T. A. Nos. 333 to 335 (Coch) of 1980, dated November 25, 1981, held that the subsidy received from the Central Government cannot be deducted from the cost of the assets to arrive at the actual cost to the assessee of the assets. Thereafter, at the instance of the Revenue, the Income-tax Appellate Tribunal has referred the question of law, formulated hereinabove, for the decision of this court.
3. We heard counsel. The previous decision of the Appellate Tribunal, relied on by the Commissioner of Income-tax (Appeals), as also by the Income-tax Appellate Tribunal, to hold that the subsidy received from the Central Government cannot be deducted from the cost of the assets to arrive at the actual cost to the assessee of the assets, was the subject-matter in I. T. R. No. 310 of 1982 of this court. (CIT v. Relish Foods [1989] 180 ITR 454). This court, in delivering the judgment dated March 16, 1989, held that the subsidy amount received by the assessee could not go to reduce the cost of the asset for the purpose of allowing depreciation and development rebate and deduction under Section 80J of the Income-tax Act. In the light of our earlier decision in I. T. R, No. 310 of 1982 dated March 16, 1989 (CIT v. Relish Foods [1989] 180 ITR 454), the decision of the Appellate Tribunal, holding that the subsidy received from the Central Government cannot be deducted from the cost of the assets to arrive at the actual cost to the assesses of the assets, has to be justified in law.
4. We answer the question referred to us in the affirmative, against the Revenue and in favour of the assessee. Both the references are disposed of as above.
5. A copy of this judgment under the seal of this court and the signature of the Registrar will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.