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Issues involved: Interpretation of expenditure on plant and machinery installations for the purpose of development rebate and depreciation u/s 256(2) of the Income Tax Act, 1961.
Background: The firm incurred an expenditure of Rs. 1,34,999 on constructions, later settled at Rs. 92,000. Initially, the entire amount was allowed for installation of machinery and plant, along with appropriate depreciation and development rebate. Subsequently, the ITO reopened the assessment under s. 147(b) of the Act, disallowing certain constructions as not part of machinery, reducing depreciation to 5% for factory building. Appeal before AAC: The AAC identified specific items not related to plant or machinery, totaling Rs. 58,130, and excluded them from development rebate and limited depreciation to 5%. The remaining Rs. 33,886 was attributed to plant and machinery installations. Appeal before Appellate Tribunal: Assessee contended that the entire Rs. 92,000 should be considered for plant and machinery, and s. 147(b) was not applicable due to initial assessment. Tribunal held the entire amount was for plant and machinery, eligible for depreciation and development rebate. Current Decision: The High Court clarified that expenses on cold storage room, platform for machinery, observation tower, and cooling tower were allowable for development rebate and higher depreciation. However, details on other items like exterior walls, store rooms, etc., were lacking. The matter was remanded to the Tribunal for further examination to determine the eligibility of these items for development rebate and depreciation. The Court directed a comprehensive review of all items to make a final determination.
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