Ajit K. Sengupta, J. - (1.) Pursuant to the decision of the Supreme Court, the following questions of law have been referred under Section 256(1) of the Income-tax Act, 1961, at the instance of the Revenue for the assessment year 1972-73 : " 1. Whether, on the facts and in the circumstances of the case, the finding and/or conclusion of the Tribunal that the sum of Rs. 1,13,62,848 being the amount of interest payment made by the assessee for purchase of two vessels was spent for the purpose of acquisition of the assessee's business assets and as such the assessee is entitled to capitalise such interest on deferred liability are vitiated in law or are otherwise unreasonable and/or perverse."
(2.) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the interest payment on loan prior to delivery of the ships amounting to Rs. 7,55,746 and Rs. 8,54,383 and other expenses of Rs. 2,89,616 and Rs. 3,34,844 should be capitalised for the purpose of development rebate ?" 2.The facts of the case are that the assessee-company had been carrying on shipping business for a long time. During the year under reference, it purchased two ships, namely, Indian Venture and Indian Valour, The capital cost of these ships was shown by the assessee at Rs. 4,74,83,585 and Rs. 4,67,88,345, respectively, which included the following expenses : JUDGEMENT_917_ITR196_1992Html1.htm
(3.) The assessee claimed development rebate on the entire cost of the two ships. The Income-tax Officer held that since this was an old business, interest on funds borrowed for the purchase of new ships and guarantee commission paid for obtaining the loans and other expenses were to be allowed as business expenses and not to be capitalised in view of the decision of the Supreme Court in the case of Challapalli Sugars Ltd. v. CIT.;