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Issues involved: The judgment involves four questions referred by the Tribunal under s. 256(1) of the Act, concerning the admissibility of depreciation on factory premises, generator as a renewable energy device, reconstruction of boundary wall expenditure, and exclusion of certain expenses for computing disallowance under IT Act, 1961.
Admissibility of Depreciation on Factory Premises: The Tribunal referred the question of whether depreciation on the entire factory premises at 10% is justified against separate rates of 5% and 10% for non-factory and factory buildings. The High Court considered previous judgments from different High Courts, including Madras, Bombay, and Calcutta, which emphasized a functional approach to determine if a structure qualifies as a factory building. The Court agreed with the functional perspective and held that the administrative block within the factory campus qualifies as a factory building, making depreciation at 10% admissible. Admissibility of Depreciation on Generator as a Renewable Energy Device: The question revolved around whether a generator qualifies as a renewable energy device for depreciation purposes. The Court relied on a judgment in Agarwal Transformers' case, which established that electric generator sets fall under renewable energy devices, allowing depreciation at 30%. No contrary judgment was presented by the Revenue, leading the Court to rule in favor of the assessee based on the established precedent. Reconstruction of Boundary Wall Expenditure: The issue addressed whether expenditure incurred on the reconstruction of a boundary wall should be considered as revenue expenditure. The Court examined various judgments, including cases involving coal mining business, oil seed crushing, and textile technology institution construction. Citing these precedents, the Court concluded that the expenditure on the boundary wall reconstruction should be treated as revenue expenditure, aligning with the decisions in similar cases. Exclusion of Certain Expenses for Disallowance Calculation: The final question pertained to the exclusion of driver's salary, car depreciation, and car repairs for computing disallowance under section 37(3A)/(3B) of the IT Act, 1961. The Court referenced a decision in CIT vs. Udaipur Distillery Co. Ltd., which provided a clear precedent for the exclusion of these expenses. Consequently, the Court answered this question in line with the established decision.
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