Law:

Section:

Section 32 read with section 43 of the Income-tax Act, 1961 - Depreciation - Rate/allowance of - Assessment years 1967-68 to 1970-71 - Whether expenditure incurred on factory building, plant and machinery and electric installations etc. should be allowed to be capitalized and should be treated as part of actual cost for purpose of allowing depreciation - Held, yes FACTS The assessee had incurred expenditure on factory building, plant and machinery and electric installations which was capitalised. The assessee claimed that the said amount should be taken as forming part of the assessee's assets and depreciation should be allowed thereon. The ITO and the AAC rejected the assessee's contention. On second appeal, the Tribunal allowed the assessee's claim. On reference : HELD The expenditure incurred should be allowed to be capitalized and should be treated as part of the 'actual cost' of the factory building, plant and machinery and electric installation for the purpose of allowing depreciation. Note : The case was decided in favour of the assessee. CASES REFERRED TO Challapalli Sugars Ltd. v. CIT [1975] 98 ITR 167 (SC), CIT v. Alcock Ashdown & Co. Ltd. [1979] 119 ITR 104 (Bom.) and CIT v.Hindustan Polymers Ltd. [1985] 156 ITR 860 (Bom.). Dr. V. Balasubramanian and K.C. Sidhwa for the Applicant. I.J. Munim and S.J. Mehta for the Respondent. JUDGMENT S.P. Bharucha, J.-The question referred to us, at the instance of the Revenue, reads thus "Whether, on the facts and circumstances of the case, a sum of Rs. 89,900 should be allowed to be capitalised and should be treated as part of the 'actual cost' of the factory building, plant and machinery and electric installation for the purpose of allowing depreciation and relief under section 84 to the assessee for the accounting period relevant to the assessment year 1967-68 and for allowing depreciation with…

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