1976 (1) TMI 12

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.... the assessment year under appeal, namely, 1966-67, should be treated as part of the cost of plant and machinery for granting depreciation and development rebate for 1966-67 assessment ?" The assessee is a company which was originally engaged only in trading operations. It extended its activities by setting up a sugar factory and the first crushing operation took place on 10th March, 1965. Prior to the commencement of production, the assessee incurred certain expenditure which was included under the following heads: Rs. Vehicles maintenance 70,722 Travelling expenses 21,413 Electricity charges 16,310 Interest on loans 3,34,278 Registration and stamp duty on mortgage loan 1,78,788 Salaries and wages 3,32,225 Insura....

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....ion of the assessee with reference to the rest of the amounts. In other words, the amounts allowed by him were to be treated as part of the actual cost of the plant and machinery, etc. Both the assessee as well as the department appealed to the Tribunal. The department wanted that none of the items should be taken into consideration in determining the actual cost for the purpose of depreciation and development rebate, while the assessee wanted that all the above items of expenditure claimed should be considered as part of such actual cost. The Tribunal held that most of the expenditure was incurred for the purpose of acquisition of the assets, for example, the loans were raised for the purpose of acquiring the assets, the stamp duty a....

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....istration and stamp duty on the mortgage loan, viz., Rs. 1,78,788, and insurance of Rs. 3,180 would have to be capitalised as they also relate to the new assets. With reference to the miscellaneous expenditure of Rs. 1,28,492 also the Tribunal has gone over the nature of the expenditure and except for a sum of Rs. 216, the rest of the expenditure referred to the acquisition expenses. Therefore, this leaves for consideration only the rest of the items. With reference to these items, the question that arises is as to what should be done. In Commissioner of Income-tax v. L. G. Balakrishnan & Sons (P.) Ltd. [1974] 95 ITR 284 (Mad) this court had occasion to consider a similar question as to whether the expenditure incurred was liable to be i....