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Issues involved: Assessment of revenue vs. capital expenditure on testing scooters, claim for depreciation on tools, dies, jigs, and fixtures, and rate of depreciation on jigs and fixtures.
Assessment of Revenue vs. Capital Expenditure on Testing Scooters: The Gujarat Small Industries Corporation claimed deduction for expenses incurred on testing scooters to ascertain road-worthiness and commercial production viability. The Income Tax Appellate Tribunal reversed the view of the Appellate Assistant Commissioner, holding the expenditure as capital in nature. The High Court analyzed various factors, including the absence of enduring advantage, the corporation's longstanding business activities, and the nature of the testing. It concluded that the expenditure was revenue in nature, as it did not create an enduring asset. The Court distinguished previous cases and upheld the claim of the assessee, ruling against the Revenue. Claim for Depreciation on Tools, Dies, Jigs, and Fixtures: The dispute centered on the deduction claimed for downward revaluation of tools, dies, jigs, and fixtures by the corporation's technical expert. The Tribunal upheld a general depreciation rate of 10%, considering these items as part of plant and machinery. The Court agreed with the Tribunal, emphasizing that depreciation rates cannot be determined by the assessee's expert. It clarified that if these items were actively used in manufacturing, they constituted part of machinery, and depreciation could only be claimed at prescribed rates. The Court rejected the claim for depreciation based on revaluation and affirmed the Tribunal's decision. Rate of Depreciation on Jigs and Fixtures: The Tribunal's decision to allow depreciation on jigs and fixtures at a general rate of 10% was challenged by the assessee. The Court supported the Tribunal's stance, stating that these items were integral to the plant and machinery. It highlighted that the claim for higher depreciation based on revaluation was impermissible, as prescribed rates must be followed. The Court concluded that the Tribunal's decision on the rate of depreciation was justified, and both questions related to depreciation on tools, dies, jigs, and fixtures were answered in favor of the Revenue. In conclusion, the High Court ruled in favor of the assessee regarding the expenditure on testing scooters but upheld the Tribunal's decisions on the depreciation claims for tools, dies, jigs, and fixtures, as well as the rate of depreciation on jigs and fixtures.
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