TMI Blog1981 (6) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of actual cost of the assets of Sahu Chemicals and as such depreciation and development rebate are admissible with reference to the said amounts ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in including in the original cost of the plant and machinery any part of the expenses incurred for (i) staff training, (ii) insurance, and (iii) power and fuel in ascertaining the actual cost for the purpose of allowance of development rebate and depreciation allowance ? 3. Whether the Tribunal was justified in law in directing the Income, tax Officer to grant development rebate on Rs. 93,768 representing interest on deferred payment for machinery ? " The Company, M/s. New Central jute Mill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the details of apportionable expenses as on 31st October, 1959, and then it was argued that the AAC's action in disallowing the depreciation and development rebate was substantially wrong. It was pointed out that the AAC was wrong in disallowing the claim in respect of 50 per cent. of the salary, wages, bonus, provident fund and welfare expenses. Similarly, it was pointed out that the power and fuel estimated as consumed by stock-in-hand and valued at Rs. 41,832 was also wrongly taken into account by the AAC. If the estimated consumption of power and fuel for the stock-in-hand was to be disallowed then the production up to 31st October, 1959, taken at Rs. 2,48,862 should be enhanced accordingly, with the result that there would be no case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed and depreciation and development rebate allowed on the same. After hearing both the parties, the Tribunal decided as follows: "We have carefully considered the pith and substance of the decisions in CIT V. Fort Gloster Industries Ltd. [1971] 79 ITR 48 (Cal) and CIT v. standard Vacuum Refining Co. of India [1966] 61 ITR 799. In our opinion, it is not necessary for us to consider the decision of the Andhra Pradesh High Court in CIT v. Challapalli Sugars Ltd. [1970] 77 ITR 392 as it I has expressed an opinion contrary to that of the Calcutta High Court in CIT v. Standard Vacuum Refining Co. [1966] 61 ITR 799, which is binding on us. We shall now go by the decisions of the Calcutta High Court in CIT v. Fort Gloster Industries Ltd. [1971 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowed by the Calcutta High Court in CIT v. Fort Gloster Industries Ltd. [1971] 79 ITR 48 and in the Standard Vacuum case [1966] 61 ITR 799. We would, therefore, go by the principles laid down in these decisions and also consider the principles of accountancy dealt with in the standard books on accountancy relied upon by on the assessee's counsel." Reference was also made by the assessee's counsel to the comments at pages 100-102 of Advanced Accounting by Batliboi, 29th Edn. The Tribunal also took into consideration the extracts from the book on " Advanced Accounting " by Carter and Pickles. According to the Tribunal, these comments relate to the principles for capitalising the expenses and not necessarily for capitalising the expenses f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... machineries. The claim of the assessee was that the interest on deferred payment for the machineries accrued prior to the commencement of the production and should be treated as forming part of the cost of the machineries. In view of the decision of the Calcutta High Court in CIT v. Fort Gloster Industries Ltd. [1971] 79 ITR 48 and CIT v. Standard Vacuum Refining Co. of India Ltd. [1966] 61 ITR 799, the Tribunal directed the ITO to grant depreciation and development rebates in accordance with law provided the necessary conditions had been satisfied by the assessee. In the above facts and circumstances, only three questions as stated earlier have been referred to this court. Mr. B. L. Pal, learned advocate for the revenue, is can did enou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account which would earn interest in the interim period. According to law as settled by the Supreme Court in Challapalli Sugars Ltd. [1975] 98 ITR 167, the interest paid to the Government of Uttar Pradesh had to be capitalised and added to the cost of the said plant which was being set up. That being so, the same amount could not be treated differently in the accounts of the assessee and converted into a loss by deducting therefrom the interest paid to the Government of Uttar Pradesh. " Thus, it was already found by this court in the aforesaid case that the costs in question were incurred for acquisition of assets, that is, plant and machinery, and bringing them into existence. Moreover, from the order of the Tribunal, it would not appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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