1984 (9) TMI 36 - HC - Income Tax

Capital Employed, Depreciation And Development Rebate, Income Tax Concession, New Industrial Undertaking

Summary

Issues:
1. Entitlement to development rebate and depreciation on allocated expenses for distillery plant.
2. Calculation of relief under section 80J of the Income-tax Act based on asset values.

Analysis:
1. The first issue revolves around the entitlement of the assessee to claim development rebate and depreciation on the amount of Rs. 36,669 allocated to the distillery plant. The assessee, a limited company, had incurred common expenses during the construction and installation of various plants, including the distillery plant. The dispute arose when the Income-tax Officer disallowed Rs. 36,669 from being capitalized as part of the plant's cost, claiming these expenses were not directly related to setting up the plant. However, the Appellate Assistant Commissioner and the Tribunal ruled in favor of the assessee. Citing the Supreme Court's decision in Challapalli Sugars Ltd. v. CIT [1975] 98 ITR 167, which emphasized including all necessary expenditure to bring assets into existence, the High Court concluded that the full amount claimed by the assessee should be allowed. Therefore, the court answered question No. (1) in the affirmative, in favor of the assessee.

2. The second issue pertains to the calculation of relief under section 80J of the Income-tax Act, specifically regarding the aggregation of asset values for all assets, irrespective of their usage during the accounting period. The court referred to its previous decision in CIT v. Alcock Ashdown & Co. Ltd. [1979] 119 ITR 164, where it was established that the relief should be calculated by aggregating all asset values as of the first day of the computation period. Following this precedent, the court answered question No. (2) in the negative and in favor of the assessee, affirming that the Tribunal had not erred in its decision.

In conclusion, the High Court ruled in favor of the assessee on both issues, allowing the claimed expenses for the distillery plant and affirming the method of calculating relief under section 80J as per established legal precedents.