COMMISSIONER OF INCOME TAX Vs. G T INDUSTRIES

JUDGEMENT

(1.) UNDER section 256(1) of the Income -tax Act, 1961 the Income -tax Appellate Tribunal has referred the following question at the instance of the Revenue :

(2.) THE assessee is a firm. The assessment year is 1966 -67 and the relevant previous year ended on March 31, 1965. During the relevant previous year, the assessee had incurred certain expenditure in setting up a factory for the manufacture of paper boards at Ujhani in District Badaun (U. P.).

(3.) THE Revenue took up the matter before the Income -tax Appellate Tribunal and contended that Rs. 86,799 could not have been capitalised. In this connection, reliance was placed on the decision of the Andhra Pradesh High Court in the case of CIT v. Challapalli Sugars Ltd. : [1970]77ITR392(AP) . The Tribunal, however, following the decision of the Calcutta High Court in the case of CIT v. Standard Vacuum Refining Co. of India Ltd. : [1966]61ITR799(Cal) , upheld the action of the Appellate Assistant Commissioner. In the said case, the Calcutta High Court had held that certain expenditure incurred prior to the setting up of the factory has to be capitalised. As there were divergent views on the issue involved, the Tribunal referred the aforesaid question for the opinion of this court.