TMI Blog1992 (5) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... st payable on arrears of commission to the commission agents for purchase of sugarcane for the assessment years 1969-70 and 1970-71 ? 2. Whether, on the facts and in the circumstances of the case, 'drainage system' came within the description of building and hence entitled to depreciation allowance ? 3. Whether, on the facts and in the circumstances of the case, depreciation was allowable on overhead water tanks by treating the same as 'plant' ? 4. Whether the Tribunal was right in holding that the capital employed would include not only the assessee's capital but also include capital borrowed by the assessee for the purpose of relief under section 80J of the Income-tax Act, 1961 ?" At the instance of the assessee, in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged to pay interest on the said arrears. A question arose as to Whether this was allowable as a deduction or not. The Supreme Court held that the payment of interest under the Cess Act was not penalty and was allowable as a deduction. The ratio of the said decision is clearly applicable to the present case and, therefore, the Income-tax Appellate Tribunal was right in allowing the said deduction. As regards questions Nos. 2 and 3, the assessee had claimed that "drainage system" and overhead tanks formed part of the building and depreciation was to be allowed on the same under section 32 of the Act. This claim was not accepted by the Income-tax Officer. An appeal was filed before the Appellate Assistant Commissioner and there again the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y treating them as part of the plant. The Tribunal no doubt held that it was part of the plant but, in order to decide the controversy, the Tribunal should have referred the question as to whether overhead tanks could be treated as plant or building. We, therefore, reframe question No. 3 as follows : "Whether, on the facts and in the circumstances of the case, depreciation was allowable on overhead water tanks by treating the same as plant or as a building?" There was some divergence of opinion amongst different High Courts as to whether drains in a factory premises constituted building or not. This controversy has been recently set at rest with the decision of the Supreme Court in the case of CIT v. Gwalior Rayon Silk Manufacturing Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r tanks form part of the plant. Therefore, in answer to question No. 3, as reframed, we hold that the assessee is entitled to depreciation on overhead water tanks by regarding the same as being part of the building. As regards question No. 4, the same pertains to the claim of the assessee with regard to relief under section 80J. It is not in dispute that the decision of the Supreme Court in Lohia Machines Ltd. v. Union of India [1985] 152 ITR 308 is applicable and the question of law as framed has to be answered in favour of the Department. Mr. Aggarwal on behalf of the assessee states that he does not press the aforesaid question which has been referred to this court at the instance of the assessee relating to initial depreciation. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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