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1. Expenditure incurred on machinery or building 2. Depreciation rate on electric furnaces Analysis: Issue 1: Expenditure incurred on machinery or building The appeal pertains to the assessment year 1978-79, where the revenue challenges the Commissioner (Appeals) order regarding the nature of expenditure incurred. The first objection concerns expenditure of Rs. 32,256 and Rs. 50,652. The expenditure on crane gantry supports and stanchions, as well as the electric switch room sub-station, was claimed to be on account of machinery installation, not building construction. The authorized representative of the assessee argued that the expenditure was necessary for installing machinery, thus qualifying for investment allowance. The revenue contended that the expenditure was in respect of building and not machinery. The Tribunal referred to the Supreme Court's decision in Challapalli Sugars Ltd. v. CIT/CIT v. Hindustan Petroleum Corpn. Ltd. [1975] 98 ITR 167, which defined 'actual cost' to include all expenditure essential to bring fixed assets into existence. The Tribunal concluded that the expenditure under both heads was part of the actual cost of machinery, making investment allowance admissible. Additionally, the Tribunal cited the Bombay Bench's decision on the electric switch room sub-station, supporting the allowance of investment allowance. The Madras High Court's decision in Addl. CIT v. Madras Cements Ltd. [1977] 110 ITR 281 was also referenced to justify the investment allowance. Consequently, the Tribunal rejected the revenue's plea regarding the expenditure. Issue 2: Depreciation rate on electric furnaces The second objection raised by the revenue concerns the depreciation rate of 15 per cent allowed on electric furnaces, treated as 'machine tools' instead of general machinery. The Tribunal considered various publications of the Government of India, including the Import Trade Control Policy and the Hand Book of Indigenous Manufacturers of Engineering Stores, which classified furnaces as machine tools. The Tribunal also referred to publications like 'Build Machines---Build India' and 'The Census of Machine Tools---India 1968,' which categorized furnaces as part of machine tools. Relying on this technical evidence, the Tribunal supported the Commissioner (Appeals)'s decision to allow depreciation at the higher rate of 15 per cent on electric furnaces. Consequently, the Tribunal confirmed the Commissioner (Appeals)'s action and dismissed the revenue's contention. In conclusion, the Tribunal dismissed the revenue's appeal based on the findings related to the nature of expenditure and the depreciation rate on electric furnaces.
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