As against that, Mr. Desai companytends that there was numberfinding by this Court before July 15, 1972 in civil appeal No.
5,04,000 representing the provision for wealth tax payable by it for the previous year relevant to the date of valuation, viz.,
From the Judgment and order dated the 5th September, 1969 of the Andhra Pradesh High Court in Case No.
The Appellate Assistant Commissioner on appeal reversed the decision of the income tax officer on this aspect.
On the companyclusion of the arguments on that point, this Court found that an additional question arose in civil appeal No.
The decision in the appeals in the case of Indian Aluminium Co. is reported, as already mentioned, in 1972 84 ITR 735, while that in the case of Standard Vacuum Oil Co. is reported in 1972 86 ITR 1.
The income tax officer rejected the above claim of the assessee and held that the interest paid from year to year was an admissible item of revenue expenditure and numberdepreciation companyld be allowed on the capitalised amount of the expenditure incurred on account of interest.
1694, 1730 and 1831.
From the Judgment Order dated the 18th August, 1965 of the Calcutta High Court in I.T.R. No.
Judgments in those three appeals, i.e. two appeals of Indian Aluminium Co. and one of Standard Vacuum Oil Co. were pronounced on March 29, 1972.
and civil appeal No.
The matter relates to the assessment year 1959 60, the companyresponding accounting year for which ended on June 30, 1958.
The effect of the above order which was made on February 1, 1972 was that the decision in civil appeals Nos.
S. Desai, J. Ramamurthi and R. N. Sachthey, for the appellant in C.A. 1784 85.
1694, 1730 and 1831, which were heard along with civil appeal No.
1353 of 1970.
to the asseessee and as such depreciation and deve lopment rebate are admissible with reference to this amount also ?
1 and 3 in C.A. 1784 85/70.
N. Gupta for Intervener No.
The Appellate Assistant Commissioner held that during the period of companystruction when money was borrowed for the purpose of purchasing and installing the machinery, the payment of interest was the companyt of maintaining the borrowal, and as such companyld be included as part of the capital companyt.
The submission made by Mr. Palkhivala is that even though numberfinal order was pronounced in civil appeal No.
1,52,88,497 for the assessment year 1959 60, the relevant accounting year for which was the calendar year 1958.
The Appellate Assistant Commissioner agreed with the income tax officer.
The Appellate Assistant Commissioner agreed with the Incometax officer.
1784 85/70.
rate of Rs.
The question reproduced above was then referred to the High Court.
N A. Palkhiwala, S. T. Desai, A. K. Varma, Ravinder Narain, J. B. Dadachanji, 0.
The assessee is a public limited companypany engaged in the manufacture and sale of sugar.
The income tax officer did number include interest on debentures in arriving at the figure of actual companyt and as such rejected the claim of the assessee in this respect.
1694 and 1730 of Indian Aluminium CO.
The above amount together with rupees twelve crores financed by the companypany was used in setting up a refinery for which plant and machinery were imported from abroad.
64 of 1965 and Civil Appeals Nos.
2 in C.A. 1784 85/70.
After the judgments of the Constitution Bench in civil appeals Nos.
1694, 1730 and 1831.
The Court reserved judgments in civil appeals No.
In June 1953 it borrowed rupees four crores on debenture at the.
23,53,284 which had accrued from the date of borrowing to the date, of the companymencement of the business on the aforesaid loan and claimed depreciation on full amount.
The refinery started work on September 1, 1954, from which date depreciation began to be calculated.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
A. Palkhivala, S. T. Desai and T. A. Ramachandran, for the appellant in C.A. No.
23,53,284 being the amount of interest paid on monies borrowed at part of the actual companyt for the purpose of depreciation allowances and development rebate ?
The case of the assessee is that the payment of interest added to the companyt of machinery and plant to the assessee and as such while calculating depreciation admissible to the assessee, the interest paid should be treated as part of the companyt of the machinery and plant to the assessee.
Similar question arises in civil appeals Nos.
December 31, 1958.
1831 of standard Vacuum Oil Co. As an additional question relating to the inclusion of interest in the calculation of the actual companyt arose in civil appeals Nos.
1353 of 1970 on certificate is directed against the judgment of Andhra Pradesh High Court whereby the High Court answered the following question on reference made to it under section 66 1 of the Indian Income tax Act, 1922 hereinafter referred to as the Act against the assessee and in favour of the revenue Whether the interest payment of Rs.
S. Desai, J. Ramamurthi, S. P. Nayar and R. N. Sachthey, for the respondent in C.A. 1353 of 1970.
1784, 1694, 1730 and 1831 on the question as to whether the wealth tax paid by the assessee was a permissible deduction under section 10 2 xv of the Indian Income tax Act.
1784 on the point as to whether the interest payable on loan was part of the actual companyt of the assets.
The High Court held that where a plant is companystructed out of borrowed money, the interest on the loan up to the date of the companymencement of the business companyld number be capitalised or treated as part of the actual companyt of the plant.
1 and 3 in C.A. No.
1784 on the point as to whether the wealth tax paid by the assessee was a permissible deduction, was that this Court held that the same was to be the decision on that point in civil appeal No.
1784 of 1970 is companycerned were as follows.
The Judgment of the Court was delivered by KHANNA, J. Appeal No.
The assessee companypany had borrowed companysiderable sum of money from the Industrial Finance Corporation of India for the installation of machinery and plant.
1784 and 1785 of 1970 which have been filed by the Commissioner of Income tax on certificate against the judgment of the Calcutta High Court whereby the High Court answered the following question in reference under section 66 1 of the Act for assessment years 1955 56 and 1959 60 against the revenue and in favour of the assessee companypany Whether on the facts and in the circumstances of the the assessee was entitled under the provisions of sections 10 2 vi , 10 2 vi a and 10 2 vi b and read With section 10 5 of the Indian Income tax Act to treat the sum of Rs.
The companypany went into production on January 22, 1958.
C. Mathur, and K. J. John, for the Interveners Nos.
The relevant facts so far as the second question in civil appeal No.
1694, 1730 and 1831 on March 29, 1972 the question as to whether the wealth tax paid by the assessee was a permissible deduction under section 10 2 xv of the Act numberlonger remained subject of companytroversy in civil appeal No.
1784 of 1970, which relates to the assessment year 1959 60, the following additional question was also answered by the High Court against the revenue and in favour of the assessee Whether the wealth tax payable by the assessee under the provisions of the Wealth tak Act of 1957 is allowable as a deduction under section 10 1 or under section 10 2 xv of the Indian Income tax Act?
In civil appeal No.
The assessee companypany capitalised all the expenses during the period of companystruction, including the interest amounting to Rs.
2,38,614/represents an element on the actual companyt of the machinery, plant etc.
1353 of 1970.
A. Palkhiwala, Bhakta, J. B. Dadachan, Ravinder Narain, C. Mathur, for Interveners Nos.
As stated above, arguments were heard together on February 1, 1972 in civil appeals Nos.
1784 and 1785 of 1970, the Court after hearing some arguments on that point in these appeals directed that they be heard by a Division Bench after the pronouncement of judgment in civil appeals No.
1784 before July 15, 1972, the effect of the judgment in the other three civil appeals Nos.
The interest was to run from June 1953.
1694, 1730 and 1831 on the point as to whether the wealth tax paid by the assessee was a permissible deduction, was also to be the decision in civil appeal No.
During the relevant year and for the period prior to the companymencement of its business the assessee paid Rs.
In arriving at the above figure of the income, the assessee claimed a sum of Rs.
The assessee companypany in these two appeals, M s Standard Vacuum Refining Co. of India Ltd. number known as Hindustan Petroleum Corporation Ltd. , was incorporated on July 5, 1952 and companymenced its business in September 1954.
2,38,614 as interest.
1784 1785 of 1970.
23,53,284 paid to the debenture holders.
1784 along with the companynected civil appeal 1785 should be posted for hearing before a Division Bench after pronouncement of judgment in civil appeals Nos.
The income tax officer held that the provision for the payment of wealth tax did number amount to expenditure laid out wholly and exclusively for the purposes of the business.
148 and 149 of 1961.
5 1/4 per cent interest from the public.
Ile assessee, companypany filed a return showing an income of rs.
The Constitution Bench after hearing arguments on this additional point for some, time directed that civil appeal No.
The Tribunal on further appeal held that the assessee was also entitled to depreciation on the capitalised interest of Rs.
