Judgment:
T.D. Sugla, J.
1. The question of law raised in this reference at the instance of the Department reads thus :
'Whether, on the facts and in the circumstances of the case, the expenditure incurred by the assessee-company during the pre-production period as aforesaid or any part thereof by way of interest on loans (Rs. 36,826), commitment charges (Rs. 3,356) and legal and professional charges (Rs. 13,375) : (a) formed part of the actual cost of plant and machinery for the purpose of granting depreciation allowance and development rebate; and (b) formed part of the capital employed in the industrial undertaking for the purpose of Section 80J relief ?'
2. The question is in two parts. The first part pertains to the question whether expenditure incurred by the assessee-company during the preproduction period such as interest on loans, commitment charges and legal and professional charges formed part of the actual cost of plant and machinery for the purpose of granting depreciation allowance and development rebate. This part of the question is squarely covered by the judgment of the Supreme Court in Challapalli Sugars Ltd. v. CIT : [1975]98ITR167(SC) in favour of the assessee. As regards the second part of the question, viz., whether such an expenditure also formed part of the capital employed in the industrial undertaking for the purpose of Section 80J relief, it is common ground that it is consequential.
3. In the above view of the matter, the question is answered in the affirmative and in favour of the assessee.
4. No order as to costs.