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TMI Blog1979 (6) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... ough it was capital expenditure, the same was not eligible for depreciation. In this view of the matter, he disallowed the claim of depreciation and initial depreciation amounting to Rs. 34,523. On appeal, the AAC accepted the assessee's claim. The revenue has come on appeal before us against the said order of the AAC. 3. We heard the learned Departmental representative and the learned counsel for the assessee. 4. The learned departmental representative heavily relied on the ruling of the Supreme Court in the case of Sitalpur Sugar Works Ltd. vs. CIT (1) in support of her contention that the assessee is not entitled to the depreciation claimed in respect of the expenditure incurred in the shifting of the factory premises. On behalf of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation in respect of the above expenditure. We have perused the above judgment of the Supreme Court. In that case, the assessee company manufacturing sugar originally had its factory at Sitalpur. Later on the ground that the place suffered from ravages of flood and that further sugar cane of good quality was not available in sufficient quantity in the neighbourhood and with a view to improve the business, the assessee removed its factory from Sitalpur to another place called Garaul. The expenditure incurred for dismantling the machinery etc. and erecting them at the new place was claimed as revenue expenses. It was held to be capital by the Supreme Court. Dealing with the further question whether the assessee would be entitled to claim dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in CIT vs. Challapalli Sugars Ltd.(4), which was reversed by the Supreme Court in the case reported in 98 ITR 167. In the instant case, the actual cost to the assessee for working out the depreciation would include the expenditure incurred for shifting the factory from the old premises and installing the same in the new premises at Tiruparankundram, which had to be necessarily done in view of the expiry of the lease period with reference to the old premises. Respectfully following the ratio of the ruling of the Supreme Court in the case of Challapalli Sugars Ltd. vs. CIT (2), approving the ruling of the Madras High Court in CIT vs. L.G. Balakrishnan and Brothers (P)Ltd.(3), we uphold the order of the AAC. 6. The next contention raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was made, then so much of the expenditure as he considers to be excessive or unreasonable can be disallowed as deduction. In this case, the ITO has not brought on record any material to show the fair market value of the goods concerned and also to show whether the payment made was really excessive and if so to what extent and further in respect of which goods. In the assessment order the ITO has merely observed that in respect of some purchases, the purchase price is excessive. Even before the ITO, the assessee had contended that the price paid by it was commensurate with the quality. The ITO has not refuted this statement of the assessee. All the same he has disallowed a sum of Rs. 15,000 on an adhoc basis. Before making the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smallness of the amount and following the ratio of the above Gujarat High Court decision, we hold that the AAC is correct in setting aside the disallowance. 12. The last point that is raised by the Revenue in this appeal is that the AAC erred in holding that there was no warrant for deducting borrowed capital in computing the capital employed for the purpose of relief under s. 80J of the IT Act, 1961. 13. We heard the parties. We find that this issue is covered by the ruling of the Madras High Court in the case of Madras Industrial Linings Ltd. vs. ITO, Companies Circle I (6), Madras and others (3) in favour of the assessee. The learned departmental representative, however, strenuously urged that the Tribunal, created under the IT Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the High Court, though of a different state so long as there is no contrary decision of any other High Court on that question. In the instant case, the Madras High Court in the case reported in 110 ITR 256 has held that r. 19A(3) of the IT Rules has to be ignored. A special Bench (Bombay)of the Tribunal comprising five Members, viz., S/Shri T.D. Sugla, Vice President, B.B. Palekar, A. Krishnamurthy, T.A. Upponi and P.G.K. Warrior in the case of M/s. Amar Dye-Chem. Ltd. Bombay vs. ITO Com, Cir. II (3), Bombay, for asst. yr. 1970-71 in ITA No.3643/Bom/1974-75,dt.1st Dec.,1977,has held that r. 19A(3) has to be ignored in the computation of capital for the purpose of relief under s. 80J. Respectfully following the above ruling of the Madra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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