COMMISSIONER OF INCOME TAX Vs. HERDILLIA CHEMICALS LIMITED

JUDGEMENT

(1.) THE Tribunal has sent a consolidated statement of the case in respect of the three years under reference, as some of the issues raised in questions referred to us are common for the years under reference.

(2.) THE assessee is a company and is engaged in chemical industry. The assessment years are 1969 -70 to 1971 -72 and the relevant previous years are the calendar years 1968, 1969 and 1970, respectively.

(3.) THE facts leading up to the dispute are summarised by the Tribunal in its order under reference at page 11 as under: 'The assessee, for the purpose of erection of its plant and buildings, had acquired leasehold rights from the Maharashtra Industrial Development Corporation, a large tract of land admeasuring about 360 acres near Kulshet village on Thane -Belapur Road. The site, before it could be fit for the erection of plant and machinery as also housing colony buildings, required clearing, excavation, levelling and drainage, etc. Since the assessee's plant and machinery and buildings were spread over a large area, it had to make roads for the easy movement of its mobile equipment, trucks, etc. The total expenditure on land development and roads came to Rs. 18,45,387 including Rs. 59,569 in respect of the unbuilt area. To protect the property of the assessee, which covered a wide area and to isolate the housing colony from the surrounding wilderness, the assessee erected fencing enclosing the said property. The fencing comprises a random rubble masonry wall (average 6' high) on a concrete foundation, surrounded by R.C.C. poles 8' high. A continuous stretch of wire mesh is running across the R.C.C. poles which are distanced 8' apart. Three rows of barbed wire run across the angles at the top of the R.C.C. poles. The total expenditure incurred by the assessee on the said fencing was Rs. 8,17,738. Since the land development expenses and expenditure on roads pertained to the plant area, to the buildings in the shape of housing colony as also the unbuilt area it has retained as a part of the leasehold lands for development and so was the position regarding the fencing expenditure (except that it did not extend to the unbuilt area), the assessee in its books had apportioned the aforestated expenditure on land development and roads of Rs. 18,45,387 and the fencing expenditure to plant and machinery, to the housing colony buildings and unbuilt area in the following manner: - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Land develop - Fenchingment and roads - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Rs. Rs.Total cost 18,45,387 8,17,758Less: Land development cost as part ofthe cost of the leasehold land anddevelopment regarding unbuilt area 49,569* - (*In respect of this amountdepreciation and development rebate - - - - - - - - - - - - - - - - - -have not been claimed.) 17,85,818 8,17,758Less: Cost pertaining to housing colony,debited to housing colony buildingsdepreciation rate 2 1/2 per cent. 5,96,634** 1,42,427 - - - - - - - - - - - - - - - - - -Balance relating to factory area 11,89,184* 6,75,331Amounts transferred to buildings infactory area on the basis of areaoccupied:To buildings -depreciation rate 2 1/2per cent. 72,375 2,84,599To buildings -depreciation rate 5per cent. 1,18,563 1,24,233To buildings -depreciation rate 10per cent. 71,226 1,52,503 - - - - - - - - - - - - - - - - - -2,62,164 5,61,335 - - - - - - - - - - - - - - - - - -Amounts transferred to plant and machinery on the basis of area occupied:To plant and machinery -depreciation rate 10 per cent. 3,26,330 40,129To plant and machinery -depreciation rate 15 per cent. 6,00,690 73,867 - - - - - - - - - - - - - - - - - - 9,27,020 1,13,996 - - - - - - - - - - - - - - - - - -Total as above 11,89,184 6,75,331 - - - - - - - - - - - - - - - - - -Rs.*Land development 3,48,438Roads 8,40,746 - - - - - - - - -11,89,184=========**Land Development 95,051Roads 5,01,583 - - - - - - - - -5,96,634========= - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -