9911796707
TMI Blog1982 (6) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... In order to obtain exchange for the import of certain machinery, namely, power driven industrial sewing and cutting machines of the value of pounds 6,882-8-2, equivalent to Rs. 91,765, the assessee executed a bond in favour of the President of India, represented by the joint Chief Controller of Imports and Exports, for a sum of Rs. 1,50,000. The relevant clause of the said bond provided that if the importers, that is, the assessee, shall within 12 months from or such further time as might be granted by the said joint Chief Controller, export ready-made garments of the value equal to Rs. 1,50,000 to foreign countries excluding Nepal, Tibet, Sikkim, Bhutan and former Portuguese possessions in India and produce the necessary evidence before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the control of the assessee. The bond was forfeited and the said amount was paid by the National and Grindlays Bank Ltd. to the Central Govt. on 8th September, 1967. In the course of the assessment proceedings for the said assessment year, namely, 1968-69, the assessee claimed a sum of Rs. 1,50,000 as a deduction in the computation of its income. This deduction was not granted by the ITO on the ground that the forfeiture was penalty for committing an act opposed to public policy. An appeal preferred by the assessee to the AAC against the order of the ITO was dismissed. The assessee then preferred an appeal to the Income-tax Appellate Tribunal. Before the Tribunal the assessee urged an additional ground, namely, " in the event it is consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness loss ? " As far as questions Nos. 2 and 3, referred to us at the instance of the assessee, are concerned, we may point out that it is the undisputed position that the assessee was not entitled to raise those questions at all in view of the decision of the Supreme Court in CIT v. V. Damodaran [1980] 121 ITR 572, as the assessee had not made any application for reference. The only question which we are called upon to consider is whether the payment of Rs. 1,50,000 can be said to be a payment of a capital nature and that the amount be added to the actual cost of the aforesaid machinery for the purpose of calculation of depreciation allowance. Section 32 of the said Act deals with the question of depreciation and provides for the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of fixed assets is to include all expenditure necessary to bring such assets into existence and to put them in a working condition. In case money is borrowed by a newly started company which is in the process of constructing and erecting its plant, the interest incurred before the commencement of production on such borrowed money can be capitalised and added to the cost of the fixed assets created as a result of such Expenditure. It may be mentioned that the said case arose under the Indian I.T, Act, 1922, but it is common ground that the principles laid down therein would be applicable to the case before us which arises under the said Act. Now, it appears to us that, in the present case, the bond was undoubtedly executed to enable the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Shetty referred us to the decision of this court in CIT v. Great Eastern Shipping Company Ltd. [1979] 118 ITR 772. We may point out that in this case the Bombay High Court has followed the aforesaid decision of the Supreme Court in Challapalli Sugars Ltd. v. CIT [1975] 98 ITR 167 (SC). The question which arose before the Bombay High Court in the aforesaid case relied upon by the assessee was altogether of different type. Hence, it was of no assistance to him. In our view, the Tribunal has not taken this point into account at all and hence has come to an erroneous conclusion. In the result, question No. 1 is answered in the negative and against the assessee. In view of all the facts and circumstances of the case, however, there will be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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