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Issues: (i) Whether the Commissioner of Income-tax was justified in passing an order under section 263 of the Income-tax Act, 1961. (ii) Whether the assessee was entitled to depreciation on roads, drains and culverts. (iii) Whether the amount of subsidy should be reduced from the cost of the assets for determining depreciation and investment allowance.
Issue (i): Whether the Commissioner of Income-tax was justified in passing an order under section 263 of the Income-tax Act, 1961.
Analysis: The answer to this question followed from the answers to the other two questions. Since the assessee succeeded on the depreciation and subsidy issues, the foundation for the Revenue's challenge to the Tribunal's view on section 263 did not survive.
Conclusion: The issue was answered in the affirmative and against the Revenue.
Issue (ii): Whether the assessee was entitled to depreciation on roads, drains and culverts.
Analysis: The issue was covered by an earlier decision of the Court, which was followed as governing authority on the allowability of depreciation on such assets.
Conclusion: The issue was answered in the affirmative and against the Revenue.
Issue (iii): Whether the amount of subsidy should be reduced from the cost of the assets for determining depreciation and investment allowance.
Analysis: The issue was covered by an earlier decision of the Court, which was followed as governing authority on the treatment of subsidy in computing the cost of assets for depreciation and investment allowance.
Conclusion: The issue was answered in the affirmative and against the Revenue.
Final Conclusion: All three referred questions were answered in favour of the Revenue and the reference was disposed of accordingly.
Ratio Decidendi: When the controlling precedent settles the allowability of depreciation and the treatment of subsidy in computing asset cost, the connected challenge to revision under section 263 fails and the referred questions are answered against the assessee.
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