Commissioner of Income Tax vs Flexicons Ltd.

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 u/s 84 to the

assessee for the accounting period relevant to the assessment year 1967-68 and for allowing depreciation with reference to the written down value

of the said capital expenditure for the subsequent assessment years 1968-69, 1969-70 and 1970-71 ?

The relevant assessment years are 1967-68, 1968-69, 1969-70 and 1970-71 for which the previous years ended on June 30, in 1966, 1967,

1968 and 1969, respectively.

During the construction of a factory, the assessee had incurred expenditure aggregating to Rs. 89,900 which was capitalised and allocated thus :

Rs.

Factory building : 10,597

Plant and machiners : 71,933

Electric installations and

fittings : 7,070

For the relevant assessment years, the assessee claimed that the said amount of Rs. 89,900 should be taken as forming part of the assessee''s

assets and depreciation should be allowed thereon. The Income Tax Officer and the Appellate Assistant Commissioner rejected the assessee''s

contention. The Tribunal allowed the second appeal by the assessee before it. It held that the amount of Rs. 89,900 had to be taken as part of the

cost of the fixed assets of the assessee and should be taken into account for the purpose of capital computation.

Counsel have fairly stated that the question must be answered in the affirmative and in favour of the assessee, having regard to the judgments of

the Supreme Court and this court in Challapalli Sugar Ltd. Vs. The Commissioner of Income Tax, A.P., Hyderabad, , Commissioner of Income

Tax, Bombay City-I Vs. Alcock Ashdown and Co. Ltd., and in Commissioner of Income Tax, Bombay City-IV, Bombay Vs. Hindustan

Polymers Ltd., .

The question is answered accordingly in the affirmative and in favour of the assessee.

No order as to costs.