- (1.) WE have heard learned counsel for the parties.
(2.) THIS reference application under S. 256(2) of the IT Act (for short 'the Act') at the instance of the Revenue is with respect to the asst. yr. 1977-78, seeking reference on a question of law from the order of the Tribunal dt. 28th July, 1988. It appears that the respondent-assessee sought capitalisation of pre-operative expense of Rs, 10,99,538. The ITO allowed the claim for a sum of Rs. 4,31,417 and disallowed for a sum of Rs. 6,68,120. In the opinion of the CIT(A), the assessee was entitled to depreciation of pre-operative expense, i.e., before the commencement of production. Accordingly he allowed the claim. The order of the CIT(A) was upheld by the Tribunal. It is contended by Mr. R.B. Mathur, the learned counsel for the Department, that under the provisions of S. 32 of the Act the depreciation is available only in respect of building, machinery, plant or furniture owned by the assessee. It is also submitted that if the amount has been spent which is not liable to the cost of building, machinery, plant or furniture then no depreciation is allowable and it raises a question of law. The learned counsel invited our attention to the provision of S. 32 wherein the word 'tangible' has been used. On the other hand, Mr. J.K. Ranka, the learned counsel for the respondent-assessee, submits that no referable question of law arises, as the controversy is concluded by decision of the apex Court in the case of Challapalli Sugars Ltd. vs. CIT 1974 CTR (SC) 309 : (1975) 98 ITR 167 (SC) : TC 29R.273. The word 'tangible' as referred by Mr. Mathur did not exist in the statute under S. 32 at the relevant time of asst. yr. 1977-78. We have read the said judgment. The apex Court in the case of Challapalli Sugars Ltd. (supra) has proceeded on the basis of definition of 'actual cost'. In view of this it cannot be said that the controversy involved is concluded by the Challapalli Sugars Ltd.'s case (supra). In our view a referable question of law arise in the instant reference application. The Tribunal erroneously rejected the application to make a reference to this Court. Consequently, we allow this application and direct the Tribunal, Jaipur to state the statement of case and refer the following question of law for the opinion of this Court: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that except the staff selection expenses of Rs. 13,124 all the other pre-operative expenses were to be capitalised for the purposes of depreciation allowance ?" ;