TMI Blog1998 (4) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... al was right in law in coming to the conclusion that depreciation and development rebate should be allowed to the assessee in respect of RCC roads constructed by the assessee? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that in respect of the machinery installed in its machinery division the assessee was entitled to relief under section 80-I of the Income-tax Act, 1961?" The matter relates to the assessment year 1972-73. In its return of income filed on June 30, 1972, the assessee-company which carried on the business of manufacturing textiles, steel tubes, machinery, gas cylinders and chemicals, claimed deduction of the expenditure that it incurred by providing medical expenses, telephone expenses and personal accident insurance premiums of three managing directors of the company. The Income-tax Officer disallowed these expenses and added them to the income of the assessee under section 40A(5) of the said Act. In appeal, the Commissioner of Income-tax (Appeals) deleted all these three items in respect of which the assessee incurred expenditure, from the computation of the disallowance. The Tribunal he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a result of the accident, then that situation would be different from a director himself taking out a personal accident insurance policy under which he would be obliged to pay the premium and not the company. If such premiums are reimbursed to the director, which is an obligation of the director himself to pay and not that of the company, qua the insurance company, then that would amount to a benefit to the director within the meaning of the provisions of section 40(c) of the said Act. In the present case, it is not shown that the director himself wanted to take out the policy or that it was his own obligation to pay the premiums and in fact no such contention was canvassed by the assessee before the lower authority. The amount of premium was Rs. 1,182 for each of the two managing directors and Rs. 1,191 for the third managing director. It appears that the premiums were paid directly by the company which had taken out the policies in respect of these three directors. We, therefore, do not find any error of law committed by the Tribunal in holding that the personal accident insurance premium was not meant to be a benefit or perquisite to the directors and, therefore, should not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of manufacturing steel tubes. The Tribunal proceeded on an erroneous footing that the question involved in the assessee's case pertaining to the assessment years 1962-63 to 1969-70 which the Tribunal had decided on March 31, 1979, was identical. As noted above, in that case the expenditure was incurred on a project for manufacture of seamless pipes and not in respect of establishing any new mini steel plant. A similar question had arisen in CIT v. S.L.M. Maneklal Industries Ltd. [1977] 107 ITR 133 (Guj), wherein the assessee had claimed deduction in respect of the expenditure incurred on getting an expert opinion for erecting a foundry, which was to be started for manufacturing raw materials. This court held that since the expenditure in question was incurred for the purpose of bringing into existence a capital asset, it must be held to be an expenditure of a capital nature within the meaning of section 37 of the Act and hence, the deduction could not be allowed under that provision by treating it as business expenditure. In CIT v. Shri Digvijay Cement Co. Ltd. [1986] 159 ITR 253, this court had held that in order to determine whether an expenditure is of the nature of revenue or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilding. This view was approved by the Supreme Court in CIT v. Gwalior Rayon Silk Mfg. Co. Ltd. [1992] 196 ITR 149, in which case it was held that roads laid within the factory premises as links or providing approach to the buildings to carry on the business activities of the assessee are "buildings" within the meaning of section 32 of the Income-tax Act, 1961, and depreciation is admissible on the capital expenditure incurred thereon. Depreciation on buildings, machinery, plant or furniture owned by the assessee and used for the purposes of business or profession is a permissible deduction under section 32 of the Act. So far as development rebate is concerned, as can be seen from the provisions of section 33 of the Act-, it could be claimed in respect of a new ship or a new aircraft, new machinery or plant, other than office appliances or road transport vehicles, owned by the assessee and wholly used for the purposes of the business carried on by him. Therefore, there is no mention of buildings in section 33 under which development rebate is claimed. Obviously, therefore, if roads are to be treated as building, no development rebate can be claimed by the assessee and only depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of certain companies. The expression "priority industry" was defined in section 80B(7) of the Act and these were enumerated in Schedule VI to the Act, which contained the list of articles and things in the context of the provisions of section 80B(7) and 80-I of the Act. Item (4) of that list referred to "industrial machinery specified under the heading "8. Industrial Machinery", sub-heading "A. Major items of specialised equipment used in specific industries", of the First Schedule to the Industries (Development and Regulation) Act, 1951 (65 of 1951)". It appears that the Tribunal did not notice that the question in paragraph 48 of its earlier order on which it relied, did not at all relate to any claim of deduction under section 80-I and proceeded on an erroneous footing that the claim related to development rebate which was the subject-matter of that paragraph 48 of its earlier order. This is why we are constrained to hold that the Tribunal committed an error in concluding, on the basis of paragraph 48 of its earlier order, that the machinery installed in the machinery division of the assessee was entitled to relief under section 80-I of the Act. This question really rem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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