AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2004 (2) TMI 47
X X X X Extracts X X X X
X X X X Extracts X X X X
....e by the assessee in the instalments financed by the ICICI was liable to be added to the cost of machinery in the computation for depreciation and investment allowance? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that depreciation at 30 per cent. was allowable in respect of cost of diesel engine set for generating electricity?" We have heard Mr. Manish R. Bhatt, learned standing counsel for the Revenue. Though served, none appears for the respondent-assessee. As far as the first question is concerned, the facts, broadly stated, are as under: The assessee had purchased machinery under a scheme of payment by instalments financed by the ICICI. Under this scheme, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the purchase of machinery and the liability to pay interest on the credit accrued as soon as the agreement was reached with the ICICI. Therefore, according to him, the entire interest was to be capitalized and included in the cost of machinery. Accordingly, the Commissioner of Income-tax (Appeals) directed the Income-tax Officer to allow depreciation and investment allowance on the cost of machinery as increased by the interest payable to the ICICI. The Commissioner of Income-tax (Appeals) also held that deduction from the total income for the interest paid to the ICICI amounting to Rs. 2,77,527 allowed by the Income-tax Officer was wrong and that this was to be added to the total income. In the Revenue's appeal, the Tribunal held that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....able because the Legislature has added Explanation 8 to section 43(1) of the Income-tax Act, 1961, by the Finance Act, 1986, with retrospective effect from April 1,1974. Having heard learned counsel for the Revenue, there being no appearance on behalf of the respondent-assessee, we are of the view that there is considerable substance in the submissions of Mr. Bhatt, learned counsel for the Revenue. By the Finance Act, 1986, the following Explanation was added as Explanation 8 with retrospective effect from April 1,1974: "Explanation 8.-For the removal of doubts, it is hereby declared that where any amount is paid or is payable as interest in connection with the acquisition of an asset, so much of such amount as is relatable to any per....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Madras High Court in India Pistons Ltd. [2000] 242 ITR 672 has rightly taken into account the insertion of the said Explanation 8. Similar view has also been taken by the Bombay High Court in CIT v. Rajaram Bandekar [1993] 202 ITR 514. We are in respectful agreement with the aforesaid view of the Bombay and Madras High Courts. In view of the above discussion, our answer to question No.1 is in the negative, i.e., in favour of the Revenue and against the assessee. Coming to question No.2, the relevant facts are as under: The assessee had claimed that cost of diesel engine set for generating electricity was allowable as revenue expenditure. This plea was rejected by the Income-tax Officer. The alternative plea of the assessee ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation, cold storages air-conditioning systems; (viii) Solar steels and desalination systems; (ix) Solar power generating systems; (x) Solar pumps based on solar thermal and solar photovoltaic conversion; (xi) Solar photovoltaic modules and panels for water pumping and other applications; (xii) Wind mills and any specially designed devices which run on windmills; (xiii) Any special devices including electric generators and pumps running on wind energy; (xiv) Biogas plants and biogas engines; (xv) Electrically operated vehicles including battery powered or fuel-cell powered vehicles; (xvi) Agricultural and municipal waste conversion devices producing energy; (xvii) Equipment for utilizing ocean waves and the....