- (1.) FOLLOWING question of law has been referred for opinion of this Court by the Tribunal, Chandigarh, arising out of its order "Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was not entitled to capitalize the expenditure of Rs. 1,86,300 incurred on electric line feeder, etc. prior to commencement of business.
(2.) THE assessee company set up a factory for manufacture of Vanaspati Ghee. The previous year of the assessee 2,08,154 for capitalisation to the cost of plant and machinery for purpose of various allowances under the IT Act, 1961 (for short, "the Act") : Date of Nature of expenditure Amount expenditure Rs. 19.5.1978 Cost of temporary electric connection 21,854 9.1.1980 Cost of power line for independent 1,85,640 feeder 9.1.1980 To inspection fee 660 2,08,154
(3.) THE AO rejected the claim of the assessee on the basis that electric lines did not belong to the assessee and that as revenue expenditure it was not incurred in the relevant assessment year. The view of the AO was confirmed by CIT(A). The Tribunal upheld the claim of the assessee to the extent of Rs. 21,854 towards the cost of temporary electric connection which was held to be intimately connected with and having direct nexus in the construction and setting up of plant and machinery. The Tribunal, however, rejected the claim of the assessee for two sums aggregating to Rs. 1,86,300 on a finding that the said expenditure is not part and parcel of the plant and machinery. Expenditure on the cost of power line for independent feeder was held to be revenue in nature in light of the judgment of this Court in CIT vs. Panbari Tea Co. Ltd. (1984) 40 CTR (P&H) 323 : (1985) 151 ITR 726 (P&H).;