TMI Blog1990 (12) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, and rule 19A of the Income-tax Rules, 1962, the Tribunal was right in holding that the exclusion of borrowed capital from the computation of capital employed in two new industrial undertakings for the purpose of section 80J was not at all justified ? 2. Whether, on the facts and in the circumstances of the case and on a correct interpretation of section 80J of the Income-tax Act, 1961, and rule 19A of the Income-tax Rules, 1962, the Tribunal was correct in holding that, in computing the capital employed in the two new industrial undertakings for the purpose of section 80J, current liabilities were to be excluded ? 3. Whether, on the facts and in the circumstances of the case and on a correct interpretation of section 80J of the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision in the case of Woolcombers of India Ltd. v. CIT [1982] 134 ITR 219 (Cal). Following the said decision, we answer the fifth question in this reference in the negative and in favour of the assessee. The sixth question in this reference is as follows : "6. Whether, on the facts and in the circumstances of this case, the Tribunal was right in upholding the disallowance of the assessee's claim of Rs. 43,990 for depreciation in the assessment for the assessment year 1971-72 ?" The facts relating to this controversy are as follows: The assessee claimed depreciation allowance of Rs. 43,990 relating to scientific research assets purchased in earlier years. The Income-tax Officer disallowed the claim on the ground that the whole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as long as those were used for scientific research. He further observed that only after the said assets were transferred for the purpose of business itself, could a claim for depreciation on the said assets be made. Being aggrieved, the assessee preferred an appeal to the Appellate Tribunal. It was the assessee's case that there was prohibition against the allowance of depreciation in the same previous year and, therefore, the depreciation claimed for the instant assessment year should have been allowed. On the other hand, the Departmental representative contended before the Tribunal that when the capital cost was entirely allowed, the question of allowing any depreciation on such cost did not arise. After considering the rival submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s amended section 35(2)(iv) of the Income-tax Act with view to clarifying that no depreciation will be admissible on any capital asset represented by expenditure which has been allowed as deduction under section 35 whether in the year in which deduction under section 35 was allowed or in any other previous year. This amendment has come into force with effect from April 1, 1962, i.e., from the commencement of the Income-tax Act, 1961, and is, accordingly, applicable in relation to the assessment year 1962-63 and subsequent years. The Tribunal has found that the entire cost of the assets was allowed as expenditure under section 35 in the respective years of acquisition of such assets. Accordingly, the question of granting further depreciati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation and development rebate and that the position as per the audited accounts would be taken into account. Similar treatment was meted out to the other items claimed by the assessee. Being aggrieved, the matter was taken, in appeal by the assessee to the Appellate Assistant Commissioner. He refused to treat the aforesaid assets as a part of the plant and machinery of the assessee and thus refused to allow development rebate on the said assets. Being aggrieved with the Appellate Assistant Commissioner's decision, the assessee preferred an appeal to the Appellate Tribunal. After hearing the assessee's learned counsel and the Revenue and also examining the evidence tendered before it on behalf of the assessee, the Appellate Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich cannot form part of the plant. All these items are essentially building structures. Having regard to the facts and circumstances of this case and the principles laid down in the aforesaid decision, it must be held that process warehouses, inter-plant connecting roads and the roads leading from the main road to the factory do not and cannot form part of the plant and machinery of the assessee but form part of the factory building, and as such are entitled to depreciation as admissible to such buildings. For the reasons aforesaid, we answer this question by saying that depreciation should be allowed in respect of the assets in question as factory building but no development rebate is allowable in respect of such assets. There will ..... X X X X Extracts X X X X X X X X Extracts X X X X
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