K.B. Lal, J.

1. The Income-tax Appellate Tribunal, Allahabad, has referred the following questions under Section 256(2) of the I.T. Act, 1961 :

"1. Whether, on the facts and in the circumstances of the case, the assessee is entitled to depreciation on the entire cost of assets constructed or purchased out of grant of money received from the Government ?

2. Whether, on the facts and in the circumstances of the case, a grant given by the Government is to be considered as a contribution by any other person or authority, or the assets acquired by the grant money, is a property of the assessee ? "

2. M/s. Lucknow Producers' Co-operative Milk Union, Lucknow (briefly the assessee), is a co-operative society. The Government of Uttar Pradesh made a grant of Rs. 75,000 to the assessee by deed of grant dated December 17, 1963, for purchase of specific capital items such as vehicles, milk storage, tanks, etc. The assessee acquired such capital assets with the help of this grant. While making assessment for the assessment year 1965-66, the ITO, inter alia, treated the grant of Rs. 75,000 as the assessee's income and subjected it to income-tax. The assessee preferred an appeal in regard t