TMI Blog1998 (12) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... ands of the assessee. The assessee appealed to the CIT(A). The CIT(A) held that the central subsidy received by the assessee need not be deducted from the cost of the plant and machinery for the purpose of determining actual cost for allowance of depreciation. To arrive at this conclusion, he relied upon the decision of Andhra Pradesh High Court in CIT vs. Godavari Plywoods Ltd. (1987) 62 CTR (AP) 179 : (1987) 168 ITR 632 (AP) : TC 29R.374. Revenue appealed against the above order of the CIT(A) to the Tribunal. The Tribunal relying upon the decision of this Court in CIT vs. Elys Plastics (P) Ltd. (1990) 87 CTR (Bom) 80 : (1991) 188 ITR 11 (Bom) : TC 29R.376, wherein following the decision of the Andhra Pradesh High Court in CIT vs. Godavari Plywoods Ltd., decisions of Madhya Pradesh High Court in CIT vs. Bhandani Capacitors (P) Ltd. (1987) 65 CTR (MP) 114 : (1987) 168 ITR 647 (MP) : TC 29R.395 and CIT vs. Premier Extraction (P) Ltd. (1988) 73 CTR (MP) 106: (1989) 175 ITR 22 (MP) : TC 29R.395 and decision of Karnataka High Court in CIT vs. Diamond Dies Mfg. Corpn. Ltd. (1988) 71 CTR (Kar) 189: (1988) 172 ITR 655 (Kar) : TC 29R.381, this Court had held that the subsidies granted on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween the two decisions of the Supreme Court and each deal with a different controversy. He, therefore, submitted that the decisions of the Supreme Court in CIT vs. P.J Chemicals Ltd. squarely applies to the present case. In support of this contention, reliance was placed by Mr. Jetly on the following passage from the decision of the Supreme Court in CIT vs. Sun Engineering Works (P) Ltd. (1992) 107 CTR (SC) 209: (1992) 198 ITR 297 (SC) : TC 51R.314 : "...The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court. A decision of this Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, the Courts must carefully try to ascertain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasonings." 4. We have carefully considered the rival submissions and perused the two decisions of the Supreme Court referred to above. In CIT vs. P.J. Chemicals Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company in land, building, plant and machinery. But this by itself does not lead to the conclusion that the subsidy is to meet the cost of land, building, plant or machinery. There is nothing in this scheme which requires the subsidy to be utilised towards meeting the cost of land, building, plant or machinery." It was further observed : "Under s. 43(1) of the IT Act, "actual cost" means the actual cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority. The subsidy in question is not paid by the Central or State Government to meet the cost of any assets of the assessee. It is given as an incentive for setting up or shifting industrial units in a backward area. The subsidy goes to augment the capital resources of the industry in question." The decision of the Andhra Pradesh High Court in CIT vs. Godavari Plywood's Ltd. was referred to with approval in the above decision. The decision of the Punjab Haryana High Court in CIT vs. Jindal Bros. Rice Mills did not find favour with this Court. 5. The Supreme Court in CIT vs. P.J. Chemicals Ltd. examined the characte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng only a measure adopted under the scheme to quantify the financial aid, is not a payment, directly or indirectly, to meet any portion of the "actual cost". 6. The issue before the Supreme Court in Sahney Steel Press Works Ltd. vs. CIT, on the other hand, was whether the subsidy received by the assessee-company from the Andhra Pradesh Government was taxable as revenue receipt or not. The question whether the amount of subsidy would be deductible from the cost of the asset for finding out actual cost for the purpose of allowance of depreciation did not even arise for consideration before the Supreme Court in that case at any stage. The earlier decision in CIT vs. P.J. Chemicals Ltd. was not referred to because that was not relevant for deciding the point in issue in that case. The only issue in that case was whether the subsidy received in the hands of the recipient was revenue receipt or capital receipt. The incentives in that case were given by way of refund of sales-tax and also by subsidy on power consumed for production to the extent stated in the notification. Exemption was given also from payment of water rate. Refund was also provided for water rate in respect of water ..... X X X X Extracts X X X X X X X X Extracts X X X X
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