Capital subsidy under section 43(1): referable question of law found for depreciation and investment allowance

A referable question of law arose on the treatment of capital subsidy under section 43(1) of the Income-tax Act, 1961 for depreciation and investment allowance. The issue was treated as substantively identical to questions already considered by other High Courts, and the grant of special leave by the Supreme Court in connected matters showed that the point was not merely academic. The statutory threshold for directing a reference was therefore satisfied, and the Tribunal was directed under section 256(2) to state the case and refer the question to the Court.

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Issues: Whether a referable question of law arose from the Tribunal's order on the treatment of capital subsidy under section 43(1) of the Income-tax Act, 1961 for the purpose of depreciation and investment allowance.

Analysis: The question was found to be identical in substance to an issue already considered by other High Courts, and the fact that special leave had been granted by the Supreme Court in connected matters on the same point indicated that the issue was not merely academic. On that basis, the Court held that the statutory threshold for directing a reference was satisfied.

Conclusion: The question of law was held to be referable, and the Tribunal was directed under section 256(2) of the Income-tax Act, 1961 to state the case and refer the question to the Court.

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