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TMI Blog2001 (3) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... e filed its return of income on July 13, 1979. The assessee claimed weighted deduction under section 35C on the expenditure of Rs. 12,87,531 which amount included Rs. 34,305 which represented depreciation on certain assets. It was disallowed by the Assessing Officer on the ground that depreciation allowance is not an expenditure to be considered for weighted deduction under section 35C of the Act. Being aggrieved, the matter was carried in appeal to the Commissioner of Income-tax (Appeals) who came to the conclusion following the decision of the Calcutta High Court in the case of Indian Leaf Tobacco Development Co. Ltd. v. CIT [1982] 137 ITR 827 that the depreciation should be treated as expenditure and should be allowed as weighted deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of this court on the interpretation of section 35C. He, therefore, urged that agricultural development allowance would cover only actual expenditure incurred in respect of the goods provided to the cultivator and it would not cover depreciation on the assets. Mr. Kaka, learned counsel for the assessee, on the other hand, contended that depreciation is not a notional expenditure. He contended that section 35C refers to capital expenditure. He submitted that under section 37 of the Income-tax Act, capital expenditure is excluded. He contended that depreciation is a prepaid expenditure. In this connection, Mr. Kaka placed reliance on the judgment of the Supreme Court in P. K. Badiani v. CIT [1976] 105 ITR 642 in which it has been held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. Section 35C finds place in Chapter IV which deals with computation of business income. Section 35C, as it stood at the relevant time, provided for agricultural development allowance. The assessee could not have claimed deduction on account of depreciation in this case under section 37 because the said section excludes capital expenditure. It is for this reason that the Legislature has provided for deduction of the amount of expenditure under section 35C in cases where the expense incurred is a capital expenditure, Under section 35C where the goods, services or facilities provided to the agriculturist or a cultivator consist of tools or implements like an electric pump, the assessee-company is certainly entitled to claim depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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