- (1.) THE Income-tax Appellate Tribunal, Amritsar Bench, has referred the following two questions for the opinion of this court: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the interest of Rs. 2,55,321 paid by the assessee on purchase of machinery should be considered as part of the cost of machinery and that the assessee-company was entitled to depreciation and development rebate on the said sum ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the addition of Rs. 19,607 paid by the assessee on account of registration expenses for raising a loan of Rs. 5 lakhs for the purpose of unit No. 5 ?"
(2.) THE first question arises out of the following facts. M/s. Oswal Spinning and Weaving Mills, Ludhiana (for short "the assessee"), was carrying on the business of spinning and weaving of woollen yarn, manufacture of civil and military blankets and woollen fabrics, etc. For the purpose of starting a new unit with 928 spindles, for production of woollen yarn, the assessee purchased machinery from M/s. Sant Andrea Navara, Italy, on deferred term basis. The payment for the machinery was to be made in equal yearly instalments, spread over a period of ten years and, while paying the instalments, interest due on the balance price had to be included. In this manner, the assessee paid an amount of Rs. 2,55,321 by way of interest. The assessee claimed that the aforesaid interest paid by it on purchase of machinery should be considered as part of the cost of machinery and that it was entitled to depreciation and development rebate on the said sum. While the Income-tax Officer and the Appellate Assistant Commissioner did not agree with the assessee, the Tribunal agreed with the assessee and gave the necessary relief.
(3.) THE learned counsel for the assessee has relied on the following four decisions--Challapalli Sugars Ltd. , v. CIT [1975] 98 ITR 167, judgment by the Supreme Court, CIT v. Tensile Steel Ltd. [1976] 104 ITR 581 (Guj), Ballarpur Paper and Straw Board v. CIT [1979] 118 ITR 613 (Bom) and CIT v. New Central Jute Mills [1982] 135 ITR 736 (Cal ). We have gone through the aforesaid, decisions and find that they fully support the assessee's case. Following the, aforesaid decisions, the first question is answered in favour of the assessee, i. e. , in the affirmative.;