1981 (3) TMI 38

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....red to US in the case of the assessee is as follows : " Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the amount of Rs. 23,069 being expenditure on milk used to test the assessee-company's plant and machinery before the plant and machinery was ready to commence commercial production is to be regarded as part of the cost of the said plant an....

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....42 and the difference was capitalised it amounted to Rs. 23,069. This amount was disallowed by the ITO and the AAC, but the Tribunal allowed the same. The reasoning of the Tribunal was that the machinery cannot be said to be installed unless its working condition is ensured beyond doubt. For the purpose of ensuring this, the installed machinery had to be worked and experimentation had to be made. ....

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....n the installation proceedings. Keeping in view the fact that the setting up of the factory would be incomplete unless some sort of trial or test runs were made, it seems that the Tribunal was not wrong in holding that this expense was also a capital expense. There is a time fixed by the I.T. Act when it can be said that a business has been set up. As stated by the Supreme Court in the aforemen....