COMMISSIONER OF INCOME-TAX Vs. AJAY METALS

JUDGEMENT

(1.) THE following question arising from the assessee's case for the assessment year 1983-84 has been referred by the Income-tax Appellate Tribunal ("the Tribunal") at the instance of the Department under Section 256 (1) of the Income-tax Act, 1961 (for short, "the Act") :

(2.) THE assessee had received certain money by way of Central subsidy. The Assessing Officer, while allowing depreciation on the assets, reduced the cost/written down value of the assets by the amount of subsidy. The assessee's plea was that Central subsidy had been given after the purchase of the assets for the purpose of promotion of industry. The assessee's plea was, however, not accepted. The Tribunal, however, took the view that the cost or the value of the asset cannot be reduced by the amount of subsidy while allowing depreciation on that asset. The assessee's claim was, therefore, allowed and depreciation was required to be computed without deducting the amount of subsidy from the cost of the asset.

(3.) THE Supreme Court, while deciding the controversy, observed as under (at page 841) : "on a consideration of the matter the view that commends itself as acceptable is the one which has commended itself to the majority of the High Courts. It is, of course, not the numerical strength that prevails--though the fact that a particular view has commended itself to a majority of the High Courts in the country is a matter for consideration--but the tensile strength of the acceptable logic in those decisions. It is aptly said that 'a judge who announces a decision must be able to demonstrate that he began from recognized legal principles and reasoned in an intellectually coherent and politically neutral way to his result'. In the present case the reasoning underlying, and implicit in, the conclusion reached by the majority of the High Courts cannot be said to be an unreasonable view and on a preponderance of preferability that view commends itself particularly in the context of a taxing statute. The expression 'actual cost' needs to be interpreted liberally. The subsidy of the nature we are concerned with, does not partake of the incidents which attract the conditions for their deducibility from 'actual cost'. "