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C.I.T. v. Eggro Paper Ltd. - INCOME TAX REFERENCE No. 81 of 1994  RD-AH 882 (29 March 2005)
Income Tax Reference No. 81 of 1994
Commissioner of Income Tax, Allahabad vs. M/s Eggro Paper Moulds Ltd., Sultanpur.
Hon'ble R.K.Agrawal, J.
Hon'ble Prakash Krishna, J.
The Income Tax Appellate Tribunal, Allahabad has referred the following questions of law under Section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") at the instance of the Revenue for opinion to this Court:-
" Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the amount of subsidy received is not deductible from the actual cost of the assets whereas in view of the provision as laid down in section 43(1) the amount of subsidy should be deductible for arriving at the actual cost of assets?"
At the instance of the assessee the Tribunal has also referred the following questions of law for opinion of this Court.
"1. Whether on the true and correct interpretation of the provisions of section 36(1)(iii) read with Section 37 of the Income-tax Act, 1961, the Tribunal was legally correct in upholding the disallowance of interest amounting to Rs. 59,250/- attributable to the debit balance appearing in the account of the Managing Director, who was a salaried employee also, of the assessee-company?
2. Whether on a due consideration of the fact that the debit balance that appeared in the account of the Managing Director (who was a salaried employee also) was in the process of recovery through re-payment and regular deductions out of his salary and to her attendant facts and circumstances of the case, the Tribunal was legally correct in upholding the disallowance of interest amounting to Rs. 59,250/-?
3. Whether even on the face of undisputed that the assessee is a public limited company and the debit balance in the account of its Managing Director/salaried employee was fully covered by its capital base, the Tribunal was legally correct in upholding the disallowance of interest amount to Rs. 59,250/- as attributable to such debit balance?
4. Whether the view taken by the Tribunal in the matter of disallowance of interest amounting to Rs. 59,250/- is not vitiated in law by non-consideration of relevant material and evidences as were on record?"
The Reference relates to the Assessment Year 1988-89.
We have heard Sri R.K.Upadhyaya, learned standing counsel for the Revenue. Nobody has appeared on behalf of the respondent assessee.
So far as the reference at the instance of the Revenue is concerned we find that in view of the decision of the Apex Court in the case of Commissioner of Income Tax vs. P.J. Chemical Ltd, (1994) 210 ITR 830, the amount of capital subsidy is not to be deducted while computing the actual cost under Section 43(1) of the Act.
Respectfully following the aforesaid decision of the Apex Court we answer the question referred to us in the affirmative, i.e., in favour of the assessee and against the Revenue.
As nobody has appeared on behalf of the assessee to press the questions referred at its instance, the questions referred to us by the assessee are returned unanswered. However, there shall be no order as to costs.
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