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TMI Blog1976 (4) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... r entitlement of depreciation and development rebate ? " The assessee is a company engaged in the manufacture of meters. It commenced production in or about October, 1963. The previous year adopted for assessments is the year ended 31st March. During the previous years relevant to the assessment years 1962-63, 1963-64 and 1964-65, the assessee incurred expenses to the extent of Rs. 5,70,624 consisting mainly of interest and bank charges, advertisements, audit fees, filing fees, managing agency remuneration, sitting fees, rent and lighting, cost of technical know-how, etc. The company capitalised this expenditure and added it to the cost of assets in its accounts. For the purpose of assessments, it claimed depreciation on such capitalised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the actual cost of machinery, working it out to Rs. 1,27,221. The total of these amounts came to Rs. 4,34,255. Since the Income-tax Officer had already allowed Rs. 1,33,565 being the payment made for the technical know-how to the foreign collaborators, the balance of Rs. 3,00,690 was directed to be allocated to the items of depreciable assets commissioned in each year on the basis as set out in the the assessment order. Against the order of the Appellate Assistant Commissioner, appeals were preferred in respect of all the three years both by the assessee as well as the department. The Income-tax Appellate Tribunal affirmed the order of the Appellate Assistant Commissioner. It is, thereafter, at the instance of the department, the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assistant Commissioner which was confirmed by the Income-tax Appellate Tribunal and the assessee itself had not come up to this court in respect of those items. Consequently, we are left with the three major heads, namely, interest and banking charges, technical staff training expenses and payment to foreign collaborators for the technical know-how and the other items finding a place in the extract given above. As far as the interest part is concerned, there is a direct decision of the Supreme Court on this point in Challapalli Sugars Ltd. v. Commissioner of Income-tax [1975] 98 ITR 167 (SC). In this decision, the Supreme Court approved the view of the Calcutta High Court in Commissioner of Income-tax v. Standard Vacuum Refining Co. of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st be held that the Appellate Assistant Commissioner as well as the Income-tax Appellate Tribunal were right in allowing the claim of the assessee to the extent of Rs. 3,07,054 being the interest paid on borrowed capital for the purpose of bringing into existence the assets. The same principle will apply to the amount spent by way of training of staff as well as payment to the foreign collaborators for the technical know-how because in the extract of the judgment of the Supreme Court given above, the expenditure necessary to bring such assets into existence and to put them in working condition is referred to. In this particular case, the Appellate Assistant Commissioner has found as a fact, as regards technical staff training expenses, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal that these amounts also were relatable to the acquisition of the assests or the erection of the machinery. In the absence of any such finding, the Appellate Assistant Commissioner and the Appellate Tribunal were not justified in allowing the claim of the assessee to capitalise the expenditure under those heads even to the extent of 50 per cent. Consequently, while affirming the conclusion of the Appellate Assistant Commissioner as well as the Appellate Tribunal with respect to the interest payment of Rs. 3,07,054 and technical staff training expenses of Rs. 50,638 for the year 1962-63 and Rs. 27,607 for the year 1963-64 and the payment of Rs. 1,33,565 to the foreign collaborators as technical know-how fees, we direct the Appellate T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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