1998 (11) TMI 20 - HC - Income Tax

Depreciation, Actual Cost, New Industrial Undertaking, Computation Of Capital, Business Expenditure, Export Markets Development Allowance

Summary

Issues:
1. Whether the subsidy received by the assessee should be reduced from the cost of assets for depreciation and relief under section 80J.
2. Whether the value of building under construction and machinery under erection should be considered for grant of relief under section 80J.
3. Whether the assessee is entitled to weighted deduction under section 35B for certain eligible expenditures.
4. Whether car allowance, house rent allowance, and medical expenses reimbursement should be excluded from disallowance under section 40A(5).

Analysis:

Issue 1:
The High Court, following the decision in CIT v. P. J. Chemicals Ltd., held that the subsidy received by the assessee should not be reduced from the cost of assets for depreciation and relief under section 80J. The Tribunal's decision in favor of the assessee was upheld against the Revenue.

Issue 2:
Referring to the case of CIT v. Alcock Ashdown and Co. Ltd. and Filtrone India Ltd., the Court determined that the value of building under construction and machinery under erection should be considered in determining the capital for grant of relief under section 80J. This decision was made in favor of the assessee, following the Supreme Court's ruling.

Issue 3:
Regarding weighted deduction under section 35B, the Court considered the case law in CIT v. Madras Rubber Factory Ltd. (No. 2) and held that royalty paid is not includible in the expenditure for weighted deduction. The Court ruled against the assessee on this aspect.

Issue 4:
In the matter of car allowance, house rent allowance, and medical expenses reimbursement, the Court referred to the decision in CIT v. Mafatlal Gangabhai and Co. (P.) Ltd. The Tribunal's decision to exclude medical expenses reimbursement from disallowance under section 40A(5) was upheld in favor of the Revenue. However, the Court remanded the case back to the Tribunal for reevaluation of other items of expenditure.

This comprehensive analysis of the judgment addresses all the issues raised in the case, providing detailed insights into the Court's decisions based on relevant legal precedents and interpretations of the Income-tax Act.