Capital subsidy and actual cost for depreciation treated as a referable question of law under income-tax procedure

A reference application under section 256(2) addressed whether the Tribunal wrongly declined to entertain the assessee's ground on the deductibility of capital subsidy in computing the actual cost of fixed assets for depreciation. The High Court treated that issue as a question of law arising from the Tribunal's order and held that it was fit to be referred for its opinion. The Tribunal was therefore directed to state the case and refer the question of law to the High Court.

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Issues: Whether the Tribunal was justified in refusing to entertain the ground relating to the deductibility of capital subsidy in determining the actual cost of fixed assets for the purpose of depreciation, and whether such question of law arose for reference under section 256(2) of the Income-tax Act, 1961.

Analysis: The application concerned a request for reference on the Tribunal's refusal to entertain the assessee's ground regarding capital subsidy and its effect on the actual cost of assets for depreciation. The Court found that the proposed question was a question of law arising from the Tribunal's order and therefore warranted reference to the High Court's opinion.

Conclusion: The reference application was allowed and the Tribunal was directed to state the case and refer the question of law to the High Court.

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