Law:

Section:

Sections 32(1)(ii) and 33(1)(b) of the income-tax act, 1961-Depreciation and development Rebate-Assessee-Company Expended Rs. 92,000 On Certain Constructions In Its Ice Cream Factory-ITO allowed depreciation and development rebate treating entire expenditure as on factory building-AAC treated Rs. 33,886 as allocable to plant and machinery but tribunal treated impugned expenditure as incurred for construction or installation of plant and machinery, eligible for higher development rebate and depreciation-Whether tribunal right in law-Held, on facts, final adjudication not possible Facts The assessee-firm, which was carrying on business of manufacture and sale of ice cream, effected certain constructions in cold storage room, platform for machine, observation and cooling tower, etc., including masonry work on main entrance, exterior walls, store rooms, etc. Its total cost was finally settled at Rs. 92,000. The ITO accepted the assessee's claim that the entire expenditure was incurred on installation of machinery and plant and allowed depreciation and development rebate on that basis. Subsequently, the ITO reopened the assessments under section 147(b) on the ground that some of the constructions could not be treated as machinery and the depreciation was allowable at a lower rate applicable to factory buildings. Since the assessee failed to furnish necessary details, the ITO completed the reopened assessments, treating the entire expenditure of Rs. 92,000 as incurred on construction of factory buildings and withdrew the development rebate and allowed depreciation at the rate applicable to factory buildings. On appeal, the AAC found that only Rs. 33,886 was allocable to cost of plant and machinery installations and allowed development rebate and depreciation accordingly. On further appeal, the Tribunal held that the entire expenditure was incurred for construction or installation of plant and machinery and must, therefore, be treated as part of plant and machinery. On reference: Held 1. Construction work of the cold storage room, platform for machine, and observation and cooling towers were essential part of the machinery and plant without which the machinery would…

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