Law:

Section:

Section 43(1), read with section 32, of the Income-tax Act, 1961 - Actual cost - Assessment year 1964-65 - Whether in determining actual cost of fixed assets, all expenses necessary to bring such assets into existence and to put assets in working condition must be taken into account and depreciation is to be allowed on basis of that actual cost - Held, yes Section 254, read with Section 256 of the Income-tax Act, 1961 - Assessment year 1964-65 - Whether it is not open to non-applicant to make a reference application filed by applicant basis of its claim that a question of law should be referred - Held, yes Whether, therefore, reference of question at instance of commissioner on an application filed by assessee was a void reference as Tribunal had no jurisdiction under provisions of Act to make that reference - Held, yes FACTS The assessee-company imported certain machinery for erection of its factory. The erection and installation of machineries were mainly entrusted to foreign technicians who had been directly delegated by the suppliers of the machinery. The plant was commissioned and put into service from 9-10-1963. The assessee-company incurred various expenses before the commencement of production. The expenses which were incurred amounting to Rs. 4,80,873 had been capitalised and the assessee claimed depreciation thereon. The ITO concluded that except for Rs. 1,18,790 the rest of the expenses, that was the sum of Rs. 3,67,083, were of the nature described in sections 30 to 36 and would be allowable either under those sections or under section 37 as revenue expenditure but for the fact that the expenses were incurred prior to the commencement of business and as none of them brought into existence any tangible or depreciable assets or added to the value of depreciable assets, he did not allow any depreciation. On appeal, the AAC confirmed the view of the ITO. On second appeal, the Tribunal also dismissed the assessee's claim of depreciation. An item of Rs. 72,537 had also been the subject-matter of appeal before the Tribunal. This amount of Rs. 72,537 represented the salary and perquisites of foreign technicians incurred after the commencement of production.…

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