TMI Blog2004 (2) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... f the court was delivered by M.S. SHAH J.-In this reference at the instance of the Revenue under section 256(1) of the Income-tax Act, 1961 ("the Act" for short), the following questions have been referred for our opinion for the assessment years 1982-83 and 1983-84: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that entire interest payable by the assessee in the instalments financed by the ICICI was liable to be added to the cost of machinery in the computation for depreciation and investment allowance? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that depreciation at 30 per cent. was allowable in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased the machinery and then paid for it on obtaining the loan. He also concluded that the interest payable in future could not be allowed as deduction as the liability did not pertain to the year. The Commissioner of Income-tax (Appeals) held that in this case the business had commenced after the installation of the machinery purchased by the assessee. The ICICI credit was obtained specifically for the purchase of machinery and the liability to pay interest on the credit accrued as soon as the agreement was reached with the ICICI. Therefore, according to him, the entire interest was to be capitalized and included in the cost of machinery. Accordingly, the Commissioner of Income-tax (Appeals) directed the Income-tax Officer to allow deprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the acquisition and installation of plant and machinery and, therefore, the apex court had held that such interest paid before the commencement of production forms part of the "actual cost" of the assets to the assessee within the meaning of the expression in section 10(5) of the Indian Income-tax Act, 1922, but in the facts of the instant case that decision would otherwise also not be applicable because the Legislature has added Explanation 8 to section 43(1) of the Income-tax Act, 1961, by the Finance Act, 1986, with retrospective effect from April 1,1974. Having heard learned counsel for the Revenue, there being no appearance on behalf of the respondent-assessee, we are of the view that there is considerable substance in the submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of interest for the period prior to the date of acquisition of the asset, the relevant provisions of section 10(2) of the Indian Income-tax Act, 1922, did not contain any explanation which is now to be found as Explanation 8 to section 43(1) of the Income-tax Act, 1961 and which Explanation was inserted by the Finance Act, 1986, with retrospective effect from April 1,1974. The decision of the Madras High Court in India Pistons Ltd. [2000] 242 ITR 672 has rightly taken into account the insertion of the said Explanation 8. Similar view has also been taken by the Bombay High Court in CIT v. Rajaram Bandekar [1993] 202 ITR 514. We are in respectful agreement with the aforesaid view of the Bombay and Madras High Courts. In view of the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dix I to the Income-tax Rules, 1962, particularly to item No. 10A. Item 10A reads as under: "10A. Renewable energy devices, being- (i) Flat plate solar collectors; (ii) Concentrating and pipe type solar collectors; (iii) Solar cookers; (iv) Solar water heaters and systems; (v) Air/gas/fluid heating systems; (vi) Solar crop driers and systems; (vii) Solar refrigeration, cold storages air-conditioning systems; (viii) Solar steels and desalination systems; (ix) Solar power generating systems; (x) Solar pumps based on solar thermal and solar photovoltaic conversion; (xi) Solar photovoltaic modules and panels for water pumping and other applications; (xii) Wind mills and any specially designed devices which run on windm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Although at first blush it may appear that this sub-item includes electric generators and, therefore, diesel sets for generating electrical energy may fall under this sub-item, on proper scrutiny it would appear that what is contemplated is electric generators running on wind energy and pumps running on wind energy. Hence, generator sets running on diesel would not fall under sub-item (xiii). In view of the above analysis of item No.10A in the Table in Part I of Appendix I to the Income-tax Rules, 1962, we are of the clear view that the diesel generator sets do not fall under item No.10A so as to entitle the assessee to claim depreciation at the higher rate of 30 per cent., but it would be allowable at the normal rate of 10 per cent. whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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