1986 (1) TMI 62

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... chinery should be considered as part of the cost of machinery and that the assessee-company was entitled to depreciation and development rebate on the said sum ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the addition of Rs. 19,607 paid by the assessee on account of registration expenses for raising a loan of Rs. 5 lakhs for the purpose of unit No. 5 ? " The first question arises out of the following facts. M/s. Oswal Spinning and Weaving Mills, Ludhiana (for short " the assessee "), was carrying on the business of spinning and weaving of woollen yarn, manufacture of civil and military blankets and woollen fabrics, etc. For the purpose of starting a new unit with 928 spindles, .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... l Corporation for the purposes of setting up a unit for manufacturing vanaspati ghee. As already noticed, the assessee hitherto was carrying on only the business of spinning and weaving of woollen yarn, manufacture of civil and military blankets and woollen fabrics, etc., and had never done the business of manufacturing of vanaspati ghee. This was a new venture. In obtaining a loan for the new venture, the assessee incurred registration expenses of Rs. 19,607 and claimed this amount as business expenditure. The Income-tax Officer found that the unit for manufacturing vanaspati ghee had not been set up during the relevant accounting period, although loan of rupees five lakhs had been taken for the purpose and, as a consequence, held that the .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... obtained is not an asset or advantage of an enduring nature; (b) that the expenditure was made for securing the use of money for a certain period ; and (c) that it is irrelevant to consider the object with which the, loan was obtained. " Once the loan is not an asset or advantage of an enduring nature, the object with which it was raised would be wholly irrelevant. Therefore, even if the unit for manufacturing vanaspati ghee had not been set up, nevertheless the registration expenses for obtaining the loan would be business expenditure and not of a capital nature, Moreover, the assessee concerned was already a running concern and was carrying on the business of spinning and weaving of woollen yarn, manufacture of civil and military blan .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X