1991 (8) TMI 67 - HC - Income Tax

High Court decision on capital gains computation, depreciation disallowance, and certification for appeal

Alembic Chemical Works Company Limited Versus Commissioner Of Income-Tax

The High Court determined that the cost of acquisition should be spread over original and bonus shares for calculating capital gains, upholding the ... Depreciation On Scientific Research Assets, Scientific Research Issues:1. Calculation of capital gains on the sale of original shares and bonus shares.2. Availability of depreciation on plant and machinery used for scientific research.Analysis:1. The High Court was tasked with determining the method for calculating capital gains arising from the sale of original shares and bonus shares for the assessment year 1972-73. The assessee claimed a deduction of Rs. 100 per share for the original shares and no cost for the bonus shares. However, the Income-tax Officer, following the decision in CIT v. Dalmia Investment Co. Ltd., spread the cost of the original shares over both types of shares. The capital gains were computed at Rs. 67,270, which was upheld by the Appellate Assistant Commissioner and the Tribunal. The court referred to previous decisions and concluded that the cost of acquisition should be spread over the original and bonus shares. Therefore, the court answered the question in the affirmative against the assessee.2. The second issue pertained to the availability of depreciation on plant and machinery used for scientific research for the assessment years 1972-73 and 1974-75. The assessee's claim for depreciation was rejected by the Income-tax Officer and the Appellate Assistant Commissioner, citing that 100% deduction had already been allowed for the expenditure on scientific research under section 35(1)(iv) read with section 35(2) of the Income-tax Act, 1961. The Tribunal upheld this view. The court noted the amendment to section 35(2)(iv) by the Finance (No. 2) Act, 1980, which disallowed depreciation if the entire cost of the assets had been deducted under that section. As a result, the claim for depreciation did not stand, and the court answered the question in the affirmative against the assessee. The reference was answered accordingly, with no order as to costs.Additionally, the court rejected the plea to certify the case as a fit one for appeal to the Supreme Court for question No. 1, as it was directly covered by the decision of the Supreme Court and previous court decisions. The court found no justification for appeal certification and therefore rejected the plea.