1985 (3) TMI 47

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....development rebate in conformity with the instruction of the Central Board of Direct Taxes as contained in their circulars relied on by the assessee ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in directing the Income-tax Officer to include the value of machinery and plant employed in plaster of paris unit in the computation of capital employed for purposes of section 84 of the Incometax Act, 1961, in conformity with the instructions of the Central Board of Direct Taxes, contained in their circulars relied on by the assessee ? The facts of the case are quite simple. The assessee had purchased machinery under a hire-purchase agreement entered into with the National Small Scale Indust....

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....6 ITR 198 and Ellerman Lines Ltd. v. CIT [1971] 82 ITR 913, left no room for doubt that the ITO was bound to follow the Circular issued by the Central Board of Direct Taxes. Accordingly, direction was given to the ITO to dispose of the contention in conformity with the instructions of the Central Board of Direct Taxes. This has led to the references before us. The main contention urged before us is that the Central Board of Direct Taxes could not issue instructions which had the effect of treating the machinery as belonging to the assessee when it was under a hire-purchase agreement. The real question is that depreciation is to be allowed when machinery belongs to the assessee and similarly in the case of development rebate. The second q....

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....g time. Circular No. 9 dated March 23, 1943, issued by the Central Board of Revenue directed that the periodical payments should be treated as (a) the consideration for hire to be allowed as a revenue deduction, and (b) a payment on account of purchase to be treated as a capital layout. It is also mentioned in that circular that depreciation should be allowed on the initial value, i.e., the amount for which the hired object could be purchased in cash on the date of the agreement. The same view was reiterated by the Central Board of Revenue in its circular dated June 26, 1959. The Central Board of Revenue again reiterated its instructions in November, 1962, and again on July 15, 1963. In the technical instructions of November, 1962, it is po....