TaxTMI 
TaxTMI 
2001 (2) TMI 120
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....ommissioner of Income-tax passed under section 263 ? (ii) Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the assessee-company was a small scale industrial undertaking ? (iii) Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the cost of installation was not to be taken into consideration for working out the cost of plant and machinery for the purposes of section 32(1)(vi) ?" The dispute relates to the assessment year 1976-77. The factual position, in a nutshell, is as follows : The assessee is a private limited company. During the relevant assessment year, while determining the amount of depreciation, the Income-tax Offi....
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....sp; 2,91,413.27 ------------------------------------------------------------------------------------ It was, in the circumstances, submitted by the assessee that the actual cost of plant and machinery was Rs. 7,43,817 and cost of installation amounting to Rs. 2,76,417 was not to be included. The Income-tax Officer accepted the details as filed and held that the assessee was a small-scale industrial undertaking. Accordingly, it was observed that initial depreciation at 20 per cent. was allowable on the cost of indigenous machinery purchased by the company. The Commissioner of Income-tax (in short the "Commissioner"), examined the aforesaid aspects under section 263 of the Act. He was of the view that Explanation (3) to section 32(1)(vi) ma....
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....ntion of the Legislature that, a small scale industrial undertaking should have different meanings at different places. In that event, according to the Tribunal, the assessee was required first to find out the cost of installation, before it could endeavour to set up an industrial undertaking on a small scale. Installation charges are added to the cost of machinery in altogether a different context, and merely because it cannot be allowed as a revenue expenditure, it has thus to be allowed over a number of years. The installation charges are, for installing the plant and machinery and those are not the cost of plant and machinery. Accordingly, it was held that the assessee was a small scale industrial undertaking. On being moved for referen....
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....t (other than office appliances or road transport vehicles) installed after that date in a small-scale industrial undertaking for the purposes of business of manufacture or production of any other articles or things, a sum equal to twenty per cent. of the actual cost of the ship, aircraft, machinery or plant to the assessee, in respect of the previous year in which the ship or aircraft is acquired or the machinery or plant is installed, or if the ship, aircraft, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year ; but any such sum shall not be deductible in determining the written down value for the purposes of clause (ii) : ... (a) any machinery or plant installed in ....
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....scale industrial undertaking, if the aggregate value of the machinery and plant installed, as on the last day of the previous year, for the purposes of the business of the undertaking does not exceed seven hundred and fifty thousand rupees ; and for this purpose the value of any machinery or plant shall be,--- (a) in the case of any machinery or plant owned by the assessee, the actual cost thereof to the assessee ; and (b) in the case of any machinery or plant hired by the assessee, the actual cost thereof as in the case of the owner of such machinery or plant." A bare reading of the provision makes the position clear that, the deductions allowable are clearly relatable to the new machinery or plant other than office appliances or road t....
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....that the plant and machinery do not become functional and are not in working condition till they are installed. The expression "actual cost" has been defined in section 43 of the Act and the expression means the actual cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority. The actual cost of the assets to the assessee would obviously include the cost of installation thereto. By way of an illustration, after referring to the meaning of the word "cost" as observed in Simon's Taxes, third edition, volume 3 (page 424), it was held that in certain cases expenses like freight or warehousing charges or insurance are to be added to the price. ....