2006 (12) TMI 115 - HC - Income Tax

Summary

Issues Involved:

1. Deduction u/s 80HH before investment allowance u/s 32A.
2. Initial depreciation on workers' toilets.
3. Pre-operative expenses as part of capital employed for u/s 80J.
4. Extra shift allowance on electric installations.
5. Initial depreciation on cycle stand.
6. Retrospective application of amended depreciation rules.

Summary:

Re: Deduction u/s 80HH before investment allowance u/s 32A

The court examined whether the Appellate Tribunal was correct in upholding the order allowing deduction u/s 80HH before investment allowance u/s 32A. The court referred to Section 80HH(1) and Section 80AB, emphasizing that income for the purposes of Section 80HH must be computed in accordance with the Act, including deductions u/s 32A. The court agreed with the Rajasthan High Court's interpretation and held that the Tribunal was incorrect. The question was answered in favor of the Revenue.

Re: Initial depreciation on workers' toilets and cycle stand

The court reviewed the provisions of Section 32(1)(iv) regarding initial depreciation for buildings used for employee welfare. It concluded that facilities like cycle stands and toilets qualify for initial depreciation as they are used for employee welfare, regardless of statutory obligations. The questions were answered in favor of the assessee.

Re: Pre-operative expenses as part of capital employed for u/s 80J

The court referred to a previous decision in Sangrur Vanaspati Mills Ltd. v. CIT, which relied on the Supreme Court's judgment in Challapalli Sugar Ltd. v. CIT. It held that pre-operative expenses necessary to bring assets into existence and working condition should be capitalized. The questions were answered in favor of the assessee.

Re: Extra shift allowance on electric installations

The court did not specifically address this issue in the provided text, but it was implied that the Tribunal's direction to reassess the claim was upheld.

Re: Retrospective application of amended depreciation rules

The court held that the amended depreciation rules could not be applied retrospectively. The Tribunal was justified in denying the benefit of amended rules not in force at the relevant time. The question was answered against the assessee.

Conclusion

The reference was disposed of accordingly, with specific questions answered in favor of either the Revenue or the assessee as detailed above.