1973 (11) TMI 41 - HC - Income Tax

Summary

Issues:
1. Allowability of certain expenses claimed by the assessee as part of the actual cost of plant and machinery for depreciation and development rebate.
2. Interpretation of the term "actual cost" under section 10(2)(vi) read with section 10(5) of the Indian Income-tax Act, 1922.

Analysis:
The High Court of BOMBAY addressed the issue of certain expenses claimed by M/s. Polychem Ltd. as part of the actual cost of plant and machinery for depreciation and development rebate. The assessee contended that these expenses should be considered for depreciation and development rebate. The Tribunal allowed an aggregate sum of Rs. 2,73,597.14 out of the claimed amount, with specific breakdowns for various expenses. The Court examined each item allowed by the Tribunal to determine its direct connection with the acquisition and installation of machinery.

The Court referred to previous judgments to interpret the term "actual cost." It highlighted that all expenditure directly or intimately related to the machinery should be included in the actual cost. The Court analyzed each item allowed by the Tribunal. Expenses such as travelling expenses for technical personnel, postage and telegrams to suppliers, insurance premium for machinery, printing and stationery expenses, technical training expenses, motor expenses, and expenses between specific periods were scrutinized for their direct connection to the machinery installation.

The Court accepted expenses like travelling expenses for technical personnel, postage and telegrams to suppliers, insurance premium for machinery, and motor expenses as directly related to the machinery installation. However, expenses like printing and stationery were disallowed for lacking a connection to the machinery acquisition. The Court upheld the Tribunal's decision on technical training expenses and expenses between specific periods, considering them directly related to the machinery acquisition.

Ultimately, the Court answered the question in the affirmative, reducing the allowable amount from Rs. 84,181 to Rs. 81,922.73. The Court directed the Commissioner to pay the costs of the reference to the assessee. Judge VIMADALAL agreed with the decision, concluding the judgment.