TMI Blog1998 (6) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be capitalised for the purpose of allowing depreciation and development rebate? 4. Whether the Tribunal is correct in law in holding that the assessee would be entitled to development rebate in respect of machinery which were installed before June 1, 1975?" Before considering the questions of law on the merits, it is necessary to mention that we heard another tax case reference arising out of the assessment of income of the same assessee for the assessment year 1978-79 and some of the questions in both the tax cases are common. The first question relates to the grant of depreciation on roads and we have in the assessee's own case in T. C. No. 1093 of 1985 (CIT v. Southern Petrochemical Industries Corporation Ltd. (No. 2) [1998] 233 ITR 400, by judgment of even date held that the assessee was entitled to depreciation on roads. Following the said decision, we answer the first question of law in the affirmative and against the Revenue. The second question deals with the claim of the assessee for depreciation at the rate of 15 per cent. on certain equipment of the assessee which came into contact with some corrosive chemicals. We have held in the same judgment that the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arters of the employees of the assessee. We are of the view that the Tribunal was correct in holding that the sum of Rs. 11,73,280 spent on horticulture should be regarded as a part of construction cost of the building. In so far as the expenditure on books and periodicals is concerned, the books and periodicals are treated as plant having a lasting value connected with the construction programme. The Supreme Court in the case of Scientific Engineering House P. Ltd. v. CIT [1986] 157 ITR 86 held that the expression "plant" has a wider meaning and books, periodicals and technical know-how documentation should be regarded as plant. Therefore, the Tribunal was right in holding that the assessee is entitled to depreciation on books and periodicals in a sum of Rs. 4,03,762. In so far as other miscellaneous expenses of Rs. 6,88,081 are concerned, the Tribunal, on the basis of materials, has found that the expenses were incurred in connection with construction activities and they were liable to be capitalised. In view of that finding of fact, we are of the opinion that the Tribunal was right in holding that the three items in question, viz., horticulture, books and periodicals and mis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 16(c) is that the assessee should furnish before the Income-tax Officer the particulars that the assessee had entered into contract for the purchase of machineries before 1st day of December, 1973, and if such condition is satisfied, section 16 of the Finance Act, 1974, provides that in case any machinery or plant was "installed" by the assessee after May 31, 1974, but before June 1, 1975, the notification withdrawing the development rebate would not apply. Section 16, inter alia, also provides that the provisions of the Income-tax Act, shall in effect apply in relation to ship, machinery or plant subject to the condition specified in clause (c). We have seen that the assessee had satisfied the condition mentioned in clause (c), viz., the assessee should have installed the machinery before June 1, 1975, and had furnished the evidence that the assessee had entered into a contract for the purchase of the machinery before December 1, 1973. The only question that remains is whether the assessee should also put the machinery to use to claim the benefit of development rebate. The development rebate is allowed as a deductible item in the computation of business income in the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fulfil the requirements of section 33 of the Income-tax Act and if it fails to satisfy any one of the conditions contained in any of the provisions, the claim of the assessee should fail. In our view, both the provisions must be read conjointly and harmoniously and section 16 of the Finance Act, 1974, is not envisaged to override the provisions of section 33 of the Income-tax Act, 1961. Therefore, the view of the Appellate Tribunal that the user is not a prerequisite condition for the grant of development rebate is not legally sustainable and its view that the condition regarding user is taken away by the provisions contained in section 16 of the Finance Act, 1974, is not sustainable in law. The Appellate Tribunal relied upon a circular of the Board which reads as under : "By the Finance Act, 1974 (20 of 1974), in section 16 thereof, an independent provision was made so as to continue the development rebate for a specified period in the following cases : (a) in the case of a ship acquired after 31 May, 1974, but before 1 June, 1975, if the taxpayer furnishes evidence to the satisfaction of the Assessing Officer that he had entered into a contract for the purpose of such ships ..... X X X X Extracts X X X X X X X X Extracts X X X X
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