1998 (3) TMI 57

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..... f the income ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the commission paid to the directors was part of the remuneration for the purpose of computation under section 40(c) of the Income-tax Act of the admissible expenditure ?" The questions of law referred at the instance of the Department read as under : "1. Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in holding that the subsidy received from SIPCOT should not be deducted from the cost of assets for purposes of allowing depreciation ? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the value of work-in-progress and the g .....

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..... tted that in so far as the commission paid to the directors at a percentage of sale by the assessee is concerned, the provisions of section 40(a)(v) and section 40A(5) do not apply. We are of the opinion that the decision of the Supreme Court relates to the interpretation of sections 40A(5) and 40(a)(v) of the Act. But, we are now concerned with the provisions of section 40(c) of the Act and the wording of section 40(c) of the Act are materially different from those found either in section 40A(5) or in section 40(a)(v) of the Act. Under section 40(c) of the Act, if a company incurred any expenditure directly or indirectly to the provision of any remuneration or benefit or amenity to a director or a person substantially interested in the com .....

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..... hat the first question of law referred is liable to be answered against the Department in view of the decision of the apex court in the case of CIT v. P. J. Chemicals Ltd. [1994] 210 ITR 830, wherein the apex court held that the subsidy granted by the Government should not be deducted in computing the actual cost of assets. Following the decision of the Supreme Court, we are of the opinion that the subsidy received from SIPCOT should not be deducted from the cost of assets for the purpose of allowing depreciation. Accordingly, we answer the first question of law referred to at the instance of the Department in the affirmative and against the Department. In so far as the second question of law referred at the instance of the Department is c .....

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