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Issues Involved:
1. Allowability of sums as revenue expenditure. 2. Tribunal's disallowance of the plea to add amounts to 'actual cost' of the plant for depreciation. 3. Computation of 'actual cost' for depreciation. 4. Inclusion of expenditure for bringing gifted machinery as part of 'actual cost'. 5. Allowability of expenditure on Mr. E. Candolif as revenue/business expenditure. 6. Treatment of expenditure on Mr. E. Candolif as part of 'actual cost' for depreciation. Summary: Issue 1: Allowability of sums as revenue expenditure The court addressed whether the sums of Rs. 46,178 and Rs. 10,399 for the assessment years 1964-65 and 1965-66, respectively, were allowable as revenue expenditure. The Tribunal had held these expenditures to be capital in nature. The court upheld the Tribunal's decision, stating that the expenditures were not revenue in nature but clearly capital. Thus, the court answered the question in the negative and in favor of the Revenue. Issue 2: Tribunal's disallowance of the plea to add amounts to 'actual cost' of the plant for depreciation The court examined whether the Tribunal rightly disallowed the assessee's plea to add the said amounts to the 'actual cost' of the plant for depreciation. The court found that the Tribunal was not justified in refusing to consider the alternative submission of the assessee. It held that the Tribunal should have passed necessary consequential orders to allow the benefit of development rebate and depreciation on such amounts. Therefore, the court answered the question in the negative and in favor of the assessee. Issue 3: Computation of 'actual cost' for depreciation The court considered whether the amounts should be added to the 'actual cost' of the plant for depreciation for the assessment years 1964-65 and 1965-66. Given that the expenditures were held to be capital in nature, the court affirmed that the assessee would be entitled to depreciation on these amounts at the appropriate rate. The court answered this question in the affirmative, in favor of the assessee. Issue 4: Inclusion of expenditure for bringing gifted machinery as part of 'actual cost' The court addressed whether the expenditure of Rs. 10,60,827 and Rs. 1,46,312 incurred for bringing the gifted machinery from Europe to Bombay should be included in the 'actual cost' for depreciation. The court held that the amounts spent on freight, customs duty, etc., were capital expenditures and should be added to the cost of the asset for depreciation purposes. Thus, the court answered this question in the affirmative, in favor of the assessee. Issue 5: Allowability of expenditure on Mr. E. Candolif as revenue/business expenditure The court examined whether the expenditure of Rs. 9,873 on Mr. E. Candolif was allowable as revenue/business expenditure for the assessment year 1965-66. The Tribunal had held this expenditure to be capital in nature. The court upheld the Tribunal's decision, stating that the expenditure was not revenue in nature but clearly capital. Thus, the court answered the question in the negative and in favor of the Revenue. Issue 6: Treatment of expenditure on Mr. E. Candolif as part of 'actual cost' for depreciation The court considered whether the expenditure on Mr. E. Candolif should be treated as part of the 'actual cost' of the plant for depreciation. Given that the expenditure was held to be capital in nature, the court affirmed that the assessee would be entitled to depreciation on this amount at the appropriate rate. The court answered this question in the affirmative, in favor of the assessee. Conclusion: The court ruled in favor of the Revenue on issues 1 and 5, and in favor of the assessee on issues 2, 3, 4, and 6. No order as to costs was made.
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