COMMISSIONER OF INCOME TAX Vs. TATA MILLS LIMITED

JUDGEMENT

(1.) THE question referred to the High Court under S. 256(1) of the IT Act, 1961, at the instance of the Revenue is as follows :

(2.) THE spindle capacity of a textile mill is restricted by the Central Government and permission of the Central Government is required for expanding the capacity. If, however, any textile mill is not able to make its use of full sanctioned capacity, it is open to another textile mill to purchase the surplus capacity of such mill.

(3.) THE AAC, however, made an observation in the appeal that the assessee might be entitled to add Rs. 75,760 to the cost of spindles for claiming depreciation allowance in the year in which the new spindles were installed. However, when the assessee made such a claim in the asst. year 1967 68, both the ITO and the AAC took the view that the sum of Rs. 75,760 could not form part of the cost of acquisition and installation of spindles. The claim for depreciation and development rebate was accordingly rejected in respect of the asst. year 1967 68. The Tribunal had two appeals before it. One appeal related to the asst. year 1965 66 in which the assessee claimed that the sum of Rs. 75,760 should be allowed as revenue expenditure. The other appeal related to the claim for depreciation and development rebate. The Tribunal while it dismissed the appeal in respect of the claim for revenue expenditure, allowed the appeal in respect of the claim for depreciation and development rebate, and it held that the amount of Rs. 75,760 was an integral part of the cost of installation of spindles which were installed in the accounting year 1966. By the question referred at the instance of the Revenue this view of the Tribunal has been challenged.