1997 (1) TMI 66

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....ing that the premium paid on leasehold land was includible in the cost of the building constructed thereon for allowance of depreciation to the assessee for the accounting period relevant to the assessment year 1975-76 ? 2. Whether, on the facts and in the circumstances of the case, the assessee was eligible for deduction in respect of the amount of Rs. 7,10,238 being the cost of the PAN catalyst written off by the assessee during the year in the determination of the total income for the year ? " Counsel for the parties are agreed that the first question is covered in favour of the Revenue by the decision of the Supreme Court in CIT v. Alps Theatre [1967] 65 ITR 377 and it may be answered accordingly. In view of the above, we answe....

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....ed to the Commissioner of Income-tax (Appeals). Before the Commissioner (Appeals), it was contended by the assessee that the PAN catalyst was an item of current asset used in the production process and not an item of fixed asset and hence the claim for deduction of the loss which occurred to the assessee on account of the same becoming obsolete or superfluous should not have been considered with reference to section 32(1)(iii) of the Act. The case of the assessee before the Commissioner (Appeals) was that the PAN catalyst having been rendered superfluous as a result of change in the production process of the chemical over the course of the years, was of no use to the assessee and hence the assessee was entitled to deduction in respect of th....

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....rt in Zenith Steel Pipes Ltd. (No. 2) (now Zenith Ltd.) v. CIT [1990] 186 ITR 594 and CIT v. Tata Iron and Steel Co. Ltd. [1977] 106 ITR 363. Counsel for the assessee further submits that the deduction has been claimed in the previous year relevant to the assessment year 1975-76 because it is the year in which it was discovered by the assessee that on account of the change in the production process, it had become obsolete. Our attention was also drawn to the statement made by the assessee before the Commissioner (Appeals) that as and when the PAN catalyst would be sold by the assessee the sale proceeds thereof would be accounted for. It was, therefore, submitted that the assessee is entitled to get deduction in respect of the above amount i....