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TMI Blog2006 (12) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... ances of the case, the hon'ble Tribunal was justified in not treating the pre-operative expenses as a part of the capital employed for the claim under section 80J? 3. Whether, on the facts and circumstances of the case, the hon'ble Tribunal was justified in directing the assessing authority to look afresh into the assessee's claim of extra shift allowance on electric installations in spite of the fact that similar matter had been decided by the same Bench in I.T.A. No. 389 of 1984 dated January 29, 1986, in the case of IAC of I.T. (Asst.) v. Vardhman Spinning and General Mills Limited, wherein following the decision in I.T.A. No. 80/ASR/1977-78 dated October 31, 1979, the hon'ble Tribunal had already confirmed that the extra shift allowance is admissible on electric installations as well and also when the above decisions were brought to the kind attention of the hon'ble Bench? Questions in R.A. No. 195 (at the instance of the assessee) 1. Whether, on the facts and circumstances of the case, the Tribunal is justified in not allowing initial depreciation on the construction of cycle stand for the welfare of the workers? 2. Whether, on the facts and circumstances of the case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as calculated in accordance with the provisions contained in sections. 30 to 43A of the Act and since investment allowance was deductible under section 32A of the Act, the same was taken into account for calculating profits and gains for the purposes of section 80HH of the Act. The Assessing Officer rejected the claim of the assessee for depreciation on amount of Rs. 19,781 spent on workers' toilets under section 32(1)(iv) of the Act, which view was upheld by the Commissioner of Income-tax (Appeals) as well as the Tribunal. The assessee claimed relief under section 80J of the Act on the value of work-in-progress and preliminary expenses. The Assessing Officer did not accept the claim with regard to pre-operative expenses. However, on appeal, the Commissioner of Income-tax (Appeals) accepted the claim on the ground that pre-operative expenses were part of capital employed in business. The Tribunal set aside this view and held that pre-operative expenses could not be included in the "capital" employed in the business. There was retrospective change in the rules of depreciation which was held by the Assessing Officer not to be applicable for the year in question and the said view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 32A of the Act also. The question was gone into by the Rajasthan High Court in CIT v. Loonkar Tools P. Ltd. [1995] 213 ITR 721. In the said judgment, reliance was also placed on the judgment of the hon'ble Supreme Court in Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 to the following effect: "On reading sub-section (1), it will become clear that three important steps are required to be taken before the special deduction permissible thereunder is allowed and the net total income exigible to tax is determined. First, compute the total income of the concerned assessee in accordance with the other provisions of the Act, i.e., in accordance with all the provisions except section 80E; secondly, ascertain what part of the total income so computed represents the profits and gains attributable to the business of the specified industry (here generation and distribution of electricity); and, thirdly, if there be profits and gains so attributable, deduct eight per cent. thereof from such profits and gains and then arrive at the net total income exigible to tax. As regards the first step mentioned above, the important words in sub-section (1) are those that appear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dance with the provisions of the Act that is, after deducting interest on monies borrowed for earning such income. If income by way of dividends from a domestic company computed in accordance with the provisions of the Act is included in the gross total income, or, in other words, forms part of the gross total income, the condition specified in the opening part of sub-section (1) of section 80M would be fulfilled and the provision enacted in that sub-section would be attracted." The judgment of the Orissa High Court in CIT v. Tarun Udyog [1991] 191 ITR 688, which was relied upon on behalf of the assessee, was dissented from on the ground that the same was contrary to the plain language of the statute. The same view was taken by the Rajasthan High Court in CIT v. Vishnu Oil and Dal Mills [1996] 218 ITR 71, CIT v. Rajasthan Udyog [1997] 225 ITR 468 and CIT v. Aggarwal Gum Industries [2001] 250 ITR 843. Learned counsel for the assessee submitted that view taken by the Orissa High Court should be preferred over the view taken by the Rajasthan High Court. We are unable to accept the submission made on behalf of the assessee. We are in respectful agreement with the Rajasthan High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lable if the building is used solely or mainly for the welfare of persons having a salary of Rs. 10,000 or less. Specification of some of the buildings, i.e., hospital, creche, school, canteen, library, recreational centre, shelter, rest-room or lunch-room, is only by way of illustration while qualification for claiming initial depreciation is that the building should be used solely or mainly for the welfare of such persons. Applying the said test, it cannot be held that the investment for providing cycle stand or toilets to the employees did not qualify for initial depreciation. The view taken by the Tribunal that depreciation will not be admissible in respect of building or amenities which the employer was bound to provide by virtue of statutory obligation under the Factories Act or otherwise, cannot be held to be sound. Whatever may be the reason for the employer to provide facilities, is not relevant for determining permissibility of determination, if such benefit is available on a clear reading of the statutory provision itself. The questions referred are, thus, answered in favour of the assessee and against the Revenue. Re: Question No. 3 in R.A. No. 194 and Question No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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