High Court rules for assessee on tax issues: capital computation, section 80J deduction, medical expenses, interest disallowance.

The High Court ruled in favor of the assessee on various tax issues: exclusion of borrowed capital and current liabilities in capital computation, allowing full deduction under section 80J for a fertiliser project, excluding medical expenses from disallowance, disallowing only a portion of interest paid to the bank, disallowing depreciation claim for scientific research assets, and treating certain assets as part of the factory building for depreciation but disallowing development rebate. Justice Ajit K. Sengupta delivered the judgment, with Justice Bhagabati Prasad Banerjee concurring on the treatment of assets as part of the factory building.

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Issues:
1. Interpretation of section 80J of the Income-tax Act, 1961 regarding exclusion of borrowed capital and current liabilities in computation of capital employed.
2. Allowance of deduction under section 80J at the full rate of 6% of capital employed in a fertiliser project.
3. Exclusion of medical expenses reimbursed to employees from disallowance under section 40(a)(v)/40(c) of the Income-tax Act, 1961.
4. Disallowance of interest paid to the bank in assessment.
5. Disallowance of depreciation claim for scientific research assets.
6. Treatment of process warehouses, inter-plant connecting roads, and roads leading to the factory as part of plant and machinery for development rebate and depreciation.

Analysis:
1. The High Court referred to the Supreme Court decision in Lohia Machines Ltd. v. Union of India [1985] 152 ITR 308 to answer questions related to the interpretation of section 80J. The exclusion of borrowed capital and current liabilities in the computation of capital employed was deemed incorrect, following the Supreme Court decision.

2. The High Court relied on the decision in CIT v. Oyster Packagers (P.) Ltd. [1985] 152 ITR 471 to conclude that the deduction under section 80J should be allowed at the full rate of 6% of the capital employed in the fertiliser project, favoring the assessee.

3. The court referred to the decision in Indian Leaf Tobacco Development Co. Ltd. v. CIT [1982] 137 ITR 827 to support the exclusion of medical expenses reimbursed to employees from disallowance under section 40(a)(v)/40(c) of the Income-tax Act, 1961, in favor of the assessee.

4. Following the decision in Woolcombers of India Ltd. v. CIT [1982] 134 ITR 219 (Cal), the court ruled against the disallowance of Rs. 1,63,514 out of interest paid to the bank in the assessment, favoring the assessee.

5. The court addressed the disallowance of depreciation claim for scientific research assets, emphasizing the provisions of section 35(1)(iv) and 35(2)(iv) of the Income-tax Act. It was held that no further depreciation was admissible on assets used for scientific research, and the claim was disallowed in favor of the Revenue.

6. The court considered the treatment of process warehouses, inter-plant connecting roads, and roads leading to the factory as part of plant and machinery for development rebate and depreciation. It was concluded that these assets should be treated as part of the factory building, allowing depreciation but disallowing development rebate.

Judges' Opinions:
- Justice Ajit K. Sengupta delivered the judgment on issues related to sections 80J, 40(a)(v)/40(c), interest disallowance, and depreciation claim for scientific research assets.
- Justice Bhagabati Prasad Banerjee concurred with the decision on the treatment of assets as part of the factory building for depreciation and development rebate.

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