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2007 (1) TMI 146 - MADRAS HIGH COURTDeduction of expenses related to obtaining fixed deposits from the public - Allowed as "Revenue Or Capital Expenditure" - Depreciation on stand by spare parts even though they were not taken for use during the year - HELD THAT:- Undisputedly, as found in the order of the Appellate Tribunal, the stand-by items are assets acquired by the assessee and kept in readiness for use whenever the machinery that is regularly used goes out of action or requires repairs. In CIT v. Vayithri Plantations Ltd.[1980 (1) TMI 27 - MADRAS HIGH COURT] which arose out of an almost similar set of facts seeking grant of development rebate. In that case, the assessee company completed the construction of building and the installation of machinery before March 31, 1971, but could not start regular manufacture with the aid of that machinery because of frequent labour unrest and the assessee claimed development rebate in respect of the machinery, but the Assessing Officer rejected the claim on the ground that the machinery in respect of which the claim had been made had only been installed and had not been used in the year of account and hence, the amount would be allowed as a deduction in the next year when the machinery was actually brought into use. However, the Commissioner as well as the Tribunal directed the grant of allowance. Applying the ratio as laid down above to the facts of the case, we are of the view that the assessee is entitled to depreciation on spare parts which are stand-by items even though they were not taken for use during the accounting year. Accordingly, the first question of law is answered in the affirmative and against the Revenue. Fixed deposits from the public - We are of the view that when the Tribunal has recorded a finding that the expenses relating to obtaining fixed deposits are closely linked with the business requirement of the assessee, such expenses are allowable expenses. We therefore hold that the Tribunal was right in holding that the expenses for obtaining fixed deposits from the public is revenue in nature. Accordingly, we answer the second question in the affirmative and against the Revenue. In fine, both the questions are answered in the affirmative and against the Revenue. The appeal stands dismissed.
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