1999 (2) TMI 46

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....y N. K. AGRAWAL J.---The Commissioner of Income-tax has required under section 256(2) of the Income-tax Act, 196 1, the following questions of law, relating to the assessment year 1980-81, to be referred by the Income-tax Appellate Tribunal (for short, the "Tribunal"), to this court for opinion : " 1. The amount of subsidy is not part and parcel of the owned capital of the assessee. Since th....

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....-81 under the Companies (Profits) Surtax Act, 1964 (for short "the Act"). While computing the capital of the assessee-company for the purpose of allowing statutory deduction from the chargeable profits, the Assessing Officer did not include the Central subsidy amounting to Rs. 3,20,100 on the plea that the amount of subsidy received by the assessee-company from the Government was not in the nature....

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....he other hand, argued that the assessee-company received subsidy from the Government because of location of its factory in a backward area. The assessee-company claimed before the Assessing Officer that the amount of subsidy is includible in the capital employed in the industrial undertaking for the purpose of surtax. The Assessing Officer wrongly rejected the claim. The amount of Central subsidy ....

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....etc. It was observed as under : "The Government subsidy, it is not unreasonable to say, is an incentive not for the specific purpose of meeting a portion of the cost of the assets, though quantified as or geared to a percentage of such cost. If that be so, it does not partake of the character of a payment intended either directly or indirectly to meet the 'actual cost"'. In the light of the ....