( 1 ) BY this reference under Sec. 256 (1) of the Income tax Act, 1961 (the Act), the Income-tax Appellate Tribunal, bangalore Bench, has referred the following question of law for the opinion of this Court:"1. Whether on the facts and in the circumstances of the case, the Appellate tribunal is right in law in holding that the subsidy of Rs. 3,30,600/- received from the Central Government for setting up industries in backward areas cannot be allocated towards any particular asset or assets and the assessee is entitled to depreciation on the cost of assets as claimed by it ?"

( 2 ) THE brief facts of the case are as follows; during the previous year relevant for the assessment year 1977-78 the assessee received a subsidy of Rs. 3,30 600/- from the Central Government for setting up industrial unit a backward area. The income-tax Officer allocated the subsidy between land, building, electrical installations, plant and machinery holding that since it went to reduce the cost of the assets in terms of Sec. 43 (1) of the Act, he reduced the written down value of the assets and allowed depreciation on the reduced cost. The finding of the ITO was confirmed by the Commissioner of i