TMI Blog1987 (1) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... exchange for payment of dollar loans ? 3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in law in holding that the assessee-company's waste ponds, fresh water tank, pipe racks, alloy piping, jetty facilities, cherry picker cranes, etc., form an integral part of the refinery and, hence the company is entitled to higher rate of depreciation and development rebate in respect of them ? 4. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the Appellate Assistant Commissioner was justified in treating the miscellaneous expenses of the company as capital and adding the same to the cost of machinery for the purpose of depreciation and development rebate ? 5. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the company's claim to expenses other than expenses incurred for technical services should be allowed ? 6. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the company is entitled to claim development rebate and depreciation on the expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s other articles constituting the plant which was being set up by the assessee. As a result of devaluation, a sum of Rs. 4,67,41,206 became payable by the assessee in excess of what would have been otherwise payable. Forming part of this amount was Rs. 18,20,528 representing the value payable towards purchase of spare parts, catalysts, etc. The assessee claimed that the said sum of Rs. 18,20,528 represented revenue expenditure and was allowable as such. The Income-tax Officer rejected the contention that it was revenue expenditure. This finding was challenged by the assessee before the Appellate Assistant Commissioner, but the assessee restricted its claim for deduction to Rs. 7,31,689. The Appellate Assistant Commissioner disallowed the deduction. On further appeal by the assessee, the Tribunal held that the sum of Rs. 7,31,689 represented revenue expenditure, but allowed deduction only to the extent of Rs. 1,56,977 being, what in the opinion of the Tribunal was, the portion relevant to the assessment year in question. The assessee also claimed a sum of Rs. 90,106 as revenue expenditure, being the foreign exchange difference caused by fluctuation in currency rates. This amount r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee and against the Revenue. The assessee claimed deduction as revenue expenditure in respect of certain items of miscellaneous expenses. The Income-tax Officer disallowed the claim and treated it as capital expenditure. However, he further held that such expenditure was not entitled to depreciation and development rebate. On appeal by the assessee, the Appellate Assistant Commissioner held that the assets in question were entitled to depreciation allowance. This finding was not challenged by the assessee. The Revenue, however, challenged the finding of the Appellate Assistant Commissioner because depreciation was allowed by him in respect of these assets. The Tribunal noticed that the assessee did not file an appeal on the ground that of the two allowances claimed, what was allowed was only depreciation. The Tribunal further noticed that the finding of the Appellate Assistant Commissioner granting depreciation allowance was challenged by the Revenue. The Tribunal, following the principle stated by the Supreme Court in Challapalli Sugars Ltd. v. CIT [1975] 98 ITR 167, allowed depreciation as well as development rebate in respect of these miscellaneous items of expenditure. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation and development rebate be allowed. In the light of the decision of the Supreme Court in Challapalli Sugars Ltd. v. CIT [1975] 98 ITR 167 and of this court in CIT v. Travancore-Cochin Chemicals Ltd. [1975] 99 ITR 24 [FB], we hold that the Tribunal was justified in allowing capitalisation of the total sum. Accordingly, we answer question No. 5 in the affirmative, that is, in favour of the assessee and against the Revenue. Forming part of the aforesaid amount of Rs. 2,04,11,840, there was a sum of Rs. 35,05,963 in respect of which the assessee claimed depreciation and development rebate, being expenses incurred in terms of Technical Services Agreement (T.S.A.). The contention of the Revenue has been that in so far as no tangible asset was obtained by the expenditure concerned, such expenditure did not attract depreciation or development rebate. This contention of the Revenue was, in our view, rightly rejected by the Tribunal in the light of the decision of the Supreme Court in Scientific Engineering House P. Ltd. v. CIT [1986] 157 ITR 86. The Supreme Court stated (headnote) : " The capital asset acquired by the appellant, viz., the technical know-how in the shape of drawing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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