Sohani, Actg. C.J.
1. By this reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), the Income-tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the capital subsidy of Rs. 73,532 should not have been deducted from the cost of fixed assets ?'
2. The material facts giving rise to this reference, briefly, are as follows :
While framing the assessment for the assessment year 1976-77, the Income-tax Officer had deducted from the cost of fixed assets of the asses-see, the amount of capital subsidy received by the assessee for the purpose of calculating depreciation admissible to the assessee. Aggrieved by the order passed by the Income-tax Officer, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals) but that appeal was dismissed. The assessee then preferred second appeal before the Tribunal. The Tribunal upheld the claim of the assessee and directed that depreciation should be allowed without deducting the amount of capital subsidy from the cost of the fixed assets. Aggrieved by the order passed by the Tribunal, the Revenue sought reference and it is at the instance of the Revenue that the aforesaid question of law has been referred to this court for its opinion.
3. At the time of hearing, learned counsel for the parties conceded that the matter arising in this case is covered by the decision of this court in CIT v. Bhandari Capacitors P. Ltd. : [1987]168ITR647(MP) . Following that decision, it must be held that the Tribunal was right in holding that the amount of capital subsidy was not deductible in computing the actual cost of the assets for the purpose of calculating depreciation admissible to the assessee.
4. For all these reasons, our answer to the question referred to this court is, in the negative and against the Revenue. In the circumstances of the case, parties shall bear their own costs of this reference.