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Issues involved:
1. Deduction of initial depreciation for determining written down value of assets. 2. Inclusion of amount for computation of capital employed under section 15C of the Indian Income-tax Act, 1922. Deduction of Initial Depreciation: The High Court of Bombay considered the case of Hindustan Antibiotics Ltd. regarding the deduction of initial depreciation on buildings and compound walls u/s 10(2)(vi) of the Indian I.T. Act, 1922. The Income Tax Officer (ITO) had deducted a sum of Rs. 7,21,772 while determining the written down value of the assets. The assessee argued before the Appellate Assistant Commissioner (AAC) that the amounts were required for future expansion and should not be excluded. However, the AAC upheld the ITO's decision. The matter was then taken to the Income-tax Appellate Tribunal, where the assessee succeeded. The Tribunal held that the initial depreciation should not be deducted, citing a previous court decision. Nevertheless, the High Court decided to follow a different view given in another judgment and answered the question in the negative, in favor of the revenue. Inclusion of Amount for Computation of Capital Employed: Regarding the inclusion of an amount for computation of capital employed under section 15C of the Indian Income-tax Act, 1922, the ITO had excluded a sum of Rs. 1,59,50,000 from the capital employed by the assessee. This exclusion was based on the company's fixed deposits, which the ITO deemed unnecessary for business purposes. The company argued that the funds were being accumulated for future projects, specifically the streptomycin and tetracycline plants. The Tribunal examined the relevant rules and financial statements, concluding that the accumulated funds were indeed required for the business. The High Court agreed with the Tribunal's decision, emphasizing that the retained profits were essential for future expansion and business operations. Therefore, the question was answered in the affirmative, in favor of the assessee. Conclusion: The High Court answered the questions referred to them as follows: 1. Question No. 1 was answered in the negative and in favor of the revenue, based on a different view taken in a previous judgment. 2. Question No. 2 was answered in the affirmative and in favor of the assessee. The parties were directed to bear their own costs.
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