Ajit k. Sengupta, J. - (1.) In this reference made at the instance of the Revenue, the following two questions have been referred by the Tribunal under Section 256(2) of the Income-tax Act, 1961, for the opinion of this court for the assessment year 1971-72 : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that a sum of Rs. 2,51,350 relating to the railway siding should be included in the computation of capital of the fertilizer project of the assessee for the purpose of arriving at deduction allowable under Section 80J of the Income-tax Act, 1961 ?
(2.) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the development rebate and depreciation were allowable in respect of Rs. 2,51,350 relating to the aforesaid railway siding ?" 2. The facts which are admitted and/or found by the Tribunal are as under : During the year under consideration, the assessee had two projects in operation, viz., Detonator Project (Explosive) Division and Fertilizer Project. In computing the capital in the fertilizer project, the Income-tax Officer did not include a sum of Rs. 2,51,351 claimed to be the value of a railway siding. The Income-tax Officer found that the assessee purchased land for Rs. 2,51,351 for construction of a railway siding but later the land was transferred to the Railways for a nominal value of rupee one. Therefore, the Income-tax Officer was of the view that the sum of Rs. 2,51,350 represented a loss arising from the transaction and was not an expenditure incurred for the construction of the railway siding. The Income-tax Officer also did not allow development rebate and depreciation on the railway siding claimed by the assessee.
(3.) The assessee appealed to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner held that the sum represented capital loss and that it was not an asset at all and could not be included in the capital. Therefore, he upheld the action of the Income-tax Officer, As regards the claim of development rebate/depreciation, the Appellate Assistant Commissioner held that the land had been transferred to the Railways and there was no asset owned by the assessee and consequently, he upheld the action of the Income-tax Officer.;