Amrit Bottlers (P) Ltd. Vs. Income Tax Officer. - Court Judgment

Excerpt:
- ordern. pachuau, a. m. : july, 1991by this miscellaneous application the assessee has required the tribunal to amend its order dt. 30th april, 1991 under the provisions of s. 254(2) of the it act, 1961.2. we have heard sri p. r. p. verma, the learned counsel of the assessee, and sri s. c. sen, the learned senior departmental representative. we have also perused the order of the tribunal dt. 30th april, 1991. the paper book filed by the assessees counsel on 8th july, 1991. on which the assessees counsel has heavily relied on was also gone through.3. on careful consideration of the arguments advanced by both the sides and the records available to us, we do not find any merit in the miscellaneous application filed by the assessee. we also find that the paper book filed by the assessee on 8th july, 1991, was not filed before the tribunal during the course of hearing the appeal. since the tribunal has passed its order on the basis of arguments advanced by both the sides during the course of hearing the appeal as well as on the basis of the records available before it, the alleged mistakes stated to have been committed by the tribunal cannot be said to be apparent from he records. in fact, the assessee merely made an attempt to pursuade the tribunal to review its order which is not permissible in law as held in a number of judicial decisions.4. in view of the facts stated above, the miscellaneous application filed by the assessee is hereby rejected.t. a. bukte, j. m. : 1st august, 19935. i have carefully gone through the proposed order of the learned accountant member in this miscellaneous application. as we cold not agree on the point of rectification of the order dt. 30th april, 1991, in ita no. 118/cal/1989 for the asst. yr. 1985-86 in this miscellaneous application on the mistake of fact, therefore, i had to differ on the point of rectification of the tribunals order on the basis of apparent mistake on the face of the order. the reasons to differ are as follows :6. the basic fact is that the assessee-company is a manufacturing company. another basic fact is that it has claimed 100% depreciation on the bottles, and wooden crates used in filling up bottles with the soft drinks and wooden shelves used to store the bottles. the assessee-company also claimed depreciation on the plant and machinery used in manufacturing the beverages. in grounds 2 and 3 of the appeal, the assessee has agitated the dispute of sustaining the disallowance of depreciation and investment allowance. audited accounts were filed before the assessing officer. the assessee-company showed loss of rs. 61,79,130 including claim of investment allowance of rs. 14,91,051 and claim of 50% depreciation on rs. 4,49,450 and 100% depreciation on purchase of bottles amounting to rs. 41,60,569. the company was registered on 23rd feb., 1983.7. the assessing officer examined the balance sheet as on 30th sept., 1984 with reference to the copy of memorandum filed before him. the assessing officer has noted in the assessment order that 'the assessee-company has claimed investment allowance for the installation of plant and generator set in the factory'. on page 4 of the assessment order, the assessing officer found that the assessee has claimed a sum of rs. 7,12,311 in the p&l; account relating to the bottles and wooden shelves written off due to breakage. the assessing officer disallowed a sum of rs. 2,58,000 from the total claim of rs. 71,23,111 out of the breakage. he held that the 100% claim of depreciation on the cost of bottles and crates was inadmissible. in page 5 of the assessment order he has held as follows :'however, i do not disagree that the bottles and crates are not constitute the word plant in relation to the manufacturing operation of the assessee-company but i am unable to accept it as plant for the purpose of allowing depreciation on the basis of my reliance on the decision of gujarat high court in cit vs . elecon engg. co. ltd. : [1974]96itr672(guj) , where, it has been observed that the article to quality as plant must have some degree of durability and it should cover the stock-in-trade or it should be quickly consumed or worn out in course of few operation. in the case of the assessee it is found that the bottle and crates are constituted the stock-in-trade of the assessee and breakage has also been claimed in the revenue account in respect of bottles and crates so the claim of depreciation by considering the above articles as plant is not found as warranted. the authorised representative also submitted for considering the claim of depreciation in terms of s. 32(i)(iii) as the value of unit of the items in respect of which the claim is made is below rs. 5,000. but as the articles could not be established as plant the decision of the gujarat high court contents of which is discussed above, the submission of the authorised representative for such is knocked off in respect thereof. accordingly the claim of depreciation returnable package as claimed in the statement of computation of loss for the year to the tune of rs. 41,60,554 is disallowed.'8. the assessees mistake of claiming breakage does not come in the way of claiming depreciation on the bottles, crates and wooden shelves. it is well settled principle that the correct position under the law should be explained to the assessee instead of denying the lawful entitlement under the law. the ito held that the depreciation was allowable on the plant and machinery but the same could not be allowed because of the decision of the gujarat high court in the case of cit vs . elecon engg. co. ltd. : [1974]96itr672(guj) .9. the assessing officer has not specifically mentioned in his order that the assessee-company is not a manufacturing company. according to him, the articles produced by the assessee-company are not durable and, therefore, the depreciation cannot be allowed. the statement of facts was filed before the tribunal along with grounds of appeal. there are two copies of the said statement of facts which are on record filed along with the appeal itself. it is mentioned therein that the assessee-company has claimed investment allowance under s. 32a on the cost of plant and machinery and electric generator in the return of income for the assessment year under appeal, on the basis of invoice value of the said plant and machinery. in para 3 of the said statement of facts it is mentioned that the assessee-company purchased and used bottles and wooden crates of value of rs. 41,60,554 for filling the soft drinks manufactured and distributing and selling the same. out of the said amount, bottles and crates of the value of rs. 7,12,311 were broken and used up and were written off in the p&l; account. the assessee-company contended that bottles and crates were plant eligible for depreciation @ 100% and adduced judgment in the cases of jai drinks and krishna bottlers (p) ltd. (copies enclosed) in support of its contention. the ito accepted that bottles and crates are plant under s. 43(3) but not plant for purposes of ss. 32 and 32a. he has disallowed the depreciation @ 100% amounting to rs. 41,60,554 and has allowed rs. 2,58,000 only out of value of bottles and crates used and written off rs. 7,12,311 on account of breakage. definition of plant under s. 43(3) is patently applicable for claims under ss. 28 to 41. as such claim under ss. 32 and 32a was allowable on items of plant covered under definition vide s. 43(3).10. the assessee has maintained the books of accounts, records, vouchers, bills and other supporting evidence which were duly produced at the assessment stage. the assessee has submitted full details and particulars of balance sheet and p&l; account items which were examined and verified were placed on record. the ito has pointed out no defect in the books of accounts or no item of disallowable nature or of the nature of personal expenses. he has made disallowance on estimate out of various items of revenue expenses alleging that the same are attributable to personal use of the directors. the expenses claimed are all related to business supported by bills, vouchers, evidences and are fully vouched and verifiable.11. these are the narrations of the assessee-company contained in paragraphs 3 and 4 of the statement of facts. the relevant documents were very much produced before the ito for his examination. the ito has disallowed the depreciation and investment allowance for different reasons without expressly mentioning that the assessee is not a manufacturing company.12. when the cit(a)s order was agitated before the tribunal, the tribunal proceeded on the ground that the evidence in respect of the manufacturing part of the assessees factory was not produced. it is true that the copies of the documents were not produced but even without the said documents it was very much on record consisting the books of account, balance sheet, p&l; account and other relevant vouchers coupled with the explanation regarding the claim. it was not the case that the evidence before the ito was not sufficient.13. at the time of hearing this miscellaneous application the learned representative shri verma for the assessee brought several facts to our notice, such as, consumption of raw materials purchased, power consumption, oil fuel consumption, electric expenses, manufacturing expenses, etc. according to shri verma, the assessee-company purchased only flavours and scent from m/s. parle (exports) (p) ltd. from the assessment order itself it can be clearly made out that the assessee-company itself is manufacturing soft drinks and it is only purchasing flavours and scent from others. similar is the case for manufacturing soda. under no circumstances it can be said that the assessee-company is not a manufacturing company and it is not entitled to depreciation and investment allowance on the bottles, crates and wooden shelves. the breakage claimed by the assessee-company on the bottles and crates cannot be taken in to account for disallowing the depreciation and investment allowance.14. we have also heard the learned departmental representative shri s. c. sen who has strongly objected to rectify the order. according to him, the assessee-company did not produce evidence at the time of hearing the appeal to prove that it is a manufacturing company to claim 100% depreciation on the bottles, crates and wooden shelves and the depreciation at the prescribed rate on the plant and machinery. depreciation is also claimed on the bottles, crates and wooden shelves trading (treating) as plant and the value of each item is below rs. 5,000. once having accepted that the bottles and wooden shelves constitute plant, depreciation cannot be disallowed. the said items cannot constitute stock-in-trade. the containers were returnable. the meaning of the assessee-companys affairs as understood that the assessee-company is bottling the concentrated chilled soft drinks supplied by m/s. parle (exports) ltd., bombay, and also purchased and sold bisleri club soda from the said company, is not a correct fact. this conclusion is not in consonance with the assessment order coupled with audited balance sheet and p&l; account. the notes attached to the account provided information as to consumption of various principal raw materials like, sugar, citric acid, carbon-di-oxide, crown corks and essence. out of the above raw materials, only essence is supplied by m/s. parle (exports) ltd., bombay and other materials are procured by the assessee-company from the established sources. the assessee was sanctioned electrical power from the state electricity board to the tune of 245 k. v. a. the assessee paid power charges of rs. 1,09,419 during the relevant accounting period under consideration. the assessee has also licence under the central excise & salt act., 1944. the assessee was paying the prescribed duty of excise of the appropriate authority.15. the process employed by the assessee comprises of purification and softing of water, preparation of raw and ready sugar syrup with the help of steam jacketed steel tanks and oil fired boiler, carbonation and flavouring of syrup, filing into the bottles with automatic fillers, processing the bottles for removal of dirt and bacteria with the help of automatic crower. these facts suggest that the assessee-company is engaged in manufacturing activity holding licences under the factories act, 1948, the india boilers act and the employees state insurance act, 1948, required for manufacturing process carried on by the assessee. the assessee also employed the same process for bisleri club soda except preparation of syrup and adding of flavours.16. the assessing officer has not discussed anything for disallowing capitalisation of preoperative expenses to the plant and machinery, on the other hand, it is held that the preoperative expenses capitalised by the assessee has no nexus with the assets and plant to confirm the disallowance. the assessing officer has not at all discussed and had not adduced any reason for disallowing capitalisation of preoperative expenses to the plant and machinery. all that he has considered is that 'the investment allowance has been claimed on the cost of plant and machinery inclusive of preoperative expenses amounting in all to rs. 59,66,007. but the actual cost of plant and machinery is rs. 57,80,718. accordingly a sum of rs. 10,83,885 is found allowable to the company for future set off' (vide page 3 of the assessment order dt. 20th feb., 1988). aggregating the actual cost of plant and machinery is rs. 57,80,718 (i.e. without capitalising the preoperative expenses) the investment allowance works out to be rs. 14,45,180 and the ito has computed rs. 10,83,885. this goes to show that the ito has completed the assessment in haste without verifying the facts before him. even the cit(a) in his order dt. 29th nov., 1988, has stated that the preoperative expenses capitalised by the assessee has no direct nexus to the assets and plant. to justify this finding no reasons are adduced.17. as per audited balance sheet filed before the ito it may be seen that the expenses in the nature of preoperative expenses capitalised to the assets are incurred during the construction and installation of plant. disallowance of all the expenses including the interest during implementation period and loan raising expenses in toto is not in accordance with established principle of low. it is a practice to capitalise the preoperative expenses incurred during the construction period to the assets and the same is supported by several decisions. even according to the accepted accounting principles this preoperative expenses require to be capitalised.18. it is held in the appellate order of the tribunal that the assessee-company is not a manufacturing company and it is not entitled for depreciation. the preoperative expenses are also not allowable fully to capitalise. the facts go to show that the assessee-company is a manufacturing company and it is entitled to 100% depreciation on bottles, crates and wooden shelves. even without looking into the documents filed at the time of hearing this miscellaneous application, this meaning can be easily construed from the facts considered by the assessing officer in the assessment order and the documents produced before him at that time. the statement of fact of the assessee produced before us at the time of hearing of the appeal also cannot be discarded without giving a finding that the statement of facts is either false or incorrect. as the tribunal has not considered the facts properly, therefore, a mistake of fact is apparent on the face of the order of the tribunal. if this mistake of fact is rectified, the assessee is entitled to get relief of 100% depreciation on bottles, crates and wooden shelves and not the depreciation at the prescribed rate on the plant and machinery. the assessee is entitled to capitalise the correct preoperative expenses.19. it is correctly argued by the learned departmental representative shri s. c. sen that if the assessees application is allowed then it would amount to revival of the order. it is well settled principle that while rectifying the mistake apparent there may be revival of the order, but that does not mean that the mistake apparent should not be rectified. because of that, the mistake should not be rectified cannot be a correct proposition. if technicalities are very serious, they cannot be ignored. but technicalities of non-production of copies of some of the documents in support of the claim before the tribunal and produced at the time of hearing of the miscellaneous application does not mean it should be discarded without looking into it. we are meant to do substantial justice and doing the substantial justice means the rightful claim of the assessee should not be rejected. i am not on the point that the evidence now produced at the time of hearing of this miscellaneous application but even without taking into consideration that evidence i am of the opinion, the evidence which was before the assessing officer at the time of making assessment was sufficient to arrive to the correct conclusion that the assessee is a manufacturing company and it is entitled to depreciation as prayed. the rightful claim of the assessee should not be disallowed on mere technicality of nor producing the evidence before the tribunal. the lawful claim of the assessee is based on the production of the books of account, audited balance sheet, p&l; account and other relevant evidence produced by the assessee at the time of making assessment. therefore, in my opinion, there is an apparent mistake on the face of the order in holding that it is not a manufacturing company and not entitled to depreciation as prayed. on the basis of these facts, in my considered opinion, there is a mistake apparent and the assessees miscellaneous application requires to be allowed. i am fortified in my conclusion by the decision of the supreme court in the case of distributors (boroda) pvt. ltd. vs. union of india & ors. : [1985]155itr120(sc) .20. in the result, the miscellaneous application is allowed by holding that the assessee is a manufacturing company and it is entitled to 100% depreciation on the bottles, crate and wooden shelves and the depreciation at the prescribed rate on plant and machinery and the proportionate capitalisation of the pre-operative expenses.

Judgment:
ORDER

N. PACHUAU, A. M. : July, 1991

By this miscellaneous application the assessee has required the Tribunal to amend its order dt. 30th April, 1991 under the provisions of S. 254(2) of the IT Act, 1961.

2. We have heard Sri P. R. P. Verma, the learned counsel of the assessee, and Sri S. C. Sen, the learned Senior Departmental Representative. We have also perused the order of the Tribunal dt. 30th April, 1991. The paper book filed by the assessees counsel on 8th July, 1991. On which the assessees counsel has heavily relied on was also gone through.

3. On careful consideration of the arguments advanced by both the sides and the records available to us, we do not find any merit in the miscellaneous application filed by the assessee. We also find that the paper book filed by the assessee on 8th July, 1991, was not filed before the Tribunal during the course of hearing the appeal. Since the Tribunal has passed its order on the basis of arguments advanced by both the sides during the course of hearing the appeal as well as on the basis of the records available before it, the alleged mistakes stated to have been committed by the Tribunal cannot be said to be apparent from he records. In fact, the assessee merely made an attempt to pursuade the Tribunal to review its order which is not permissible in law as held in a number of judicial decisions.

4. In view of the facts stated above, the miscellaneous application filed by the assessee is hereby rejected.

T. A. BUKTE, J. M. : 1st August, 1993

5. I have carefully gone through the proposed order of the learned Accountant Member in this miscellaneous application. As we cold not agree on the point of rectification of the order dt. 30th April, 1991, in ITA No. 118/Cal/1989 for the asst. yr. 1985-86 in this miscellaneous application on the mistake of fact, therefore, I had to differ on the point of rectification of the Tribunals order on the basis of apparent mistake on the face of the order. The reasons to differ are as follows :

6. The basic fact is that the assessee-company is a manufacturing company. Another basic fact is that it has claimed 100% depreciation on the bottles, and wooden crates used in filling up bottles with the soft drinks and wooden shelves used to store the bottles. The assessee-company also claimed depreciation on the plant and machinery used in manufacturing the beverages. In grounds 2 and 3 of the appeal, the assessee has agitated the dispute of sustaining the disallowance of depreciation and investment allowance. Audited accounts were filed before the Assessing Officer. The assessee-company showed loss of Rs. 61,79,130 including claim of investment allowance of Rs. 14,91,051 and claim of 50% depreciation on Rs. 4,49,450 and 100% depreciation on purchase of bottles amounting to Rs. 41,60,569. The company was registered on 23rd Feb., 1983.

7. The Assessing Officer examined the balance sheet as on 30th Sept., 1984 with reference to the copy of memorandum filed before him. The Assessing Officer has noted in the assessment order that 'The assessee-company has claimed investment allowance for the installation of plant and generator set in the factory'. On page 4 of the assessment order, the Assessing Officer found that the assessee has claimed a sum of Rs. 7,12,311 in the P&L; account relating to the bottles and wooden shelves written off due to breakage. The Assessing Officer disallowed a sum of Rs. 2,58,000 from the total claim of Rs. 71,23,111 out of the breakage. He held that the 100% claim of depreciation on the cost of bottles and crates was inadmissible. In page 5 of the assessment order he has held as follows :

'However, I do not disagree that the bottles and crates are not constitute the word Plant in relation to the manufacturing operation of the assessee-company but I am unable to accept it as plant for the purpose of allowing depreciation on the basis of my reliance on the decision of Gujarat High Court in CIT vs . Elecon Engg. Co. Ltd. : [1974]96ITR672(Guj) , where, it has been observed that the article to quality as plant must have some degree of durability and it should cover the stock-in-trade or it should be quickly consumed or worn out in course of few operation. In the case of the assessee it is found that the bottle and crates are constituted the stock-in-trade of the assessee and breakage has also been claimed in the revenue account in respect of bottles and crates so the claim of depreciation by considering the above articles as plant is not found as warranted. The authorised representative also submitted for considering the claim of depreciation in terms of S. 32(i)(iii) as the value of unit of the items in respect of which the claim is made is below Rs. 5,000. But as the articles could not be established as plant the decision of the Gujarat High Court contents of which is discussed above, the submission of the authorised representative for such is knocked off in respect thereof. Accordingly the claim of depreciation returnable package as claimed in the statement of computation of loss for the year to the tune of Rs. 41,60,554 is disallowed.'

8. The assessees mistake of claiming breakage does not come in the way of claiming depreciation on the bottles, crates and wooden shelves. It is well settled principle that the correct position under the law should be explained to the assessee instead of denying the lawful entitlement under the law. The ITO held that the depreciation was allowable on the plant and machinery but the same could not be allowed because of the decision of the Gujarat High Court in the case of CIT vs . Elecon Engg. Co. Ltd. : [1974]96ITR672(Guj) .

9. The Assessing Officer has not specifically mentioned in his order that the assessee-company is not a manufacturing company. According to him, the articles produced by the assessee-company are not durable and, therefore, the depreciation cannot be allowed. The statement of facts was filed before the Tribunal along with grounds of appeal. There are two copies of the said statement of facts which are on record filed along with the appeal itself. It is mentioned therein that the assessee-company has claimed investment allowance under S. 32A on the cost of plant and machinery and electric generator in the return of income for the assessment year under appeal, on the basis of invoice value of the said plant and machinery. In para 3 of the said statement of facts it is mentioned that the assessee-company purchased and used bottles and wooden crates of value of Rs. 41,60,554 for filling the soft drinks manufactured and distributing and selling the same. Out of the said amount, bottles and crates of the value of Rs. 7,12,311 were broken and used up and were written off in the P&L; account. The assessee-company contended that bottles and crates were plant eligible for depreciation @ 100% and adduced judgment in the cases of Jai Drinks and Krishna Bottlers (P) LTD. (copies enclosed) in support of its contention. The ITO accepted that bottles and crates are plant under S. 43(3) but not plant for purposes of Ss. 32 and 32A. He has disallowed the depreciation @ 100% amounting to Rs. 41,60,554 and has allowed Rs. 2,58,000 only out of value of bottles and crates used and written off Rs. 7,12,311 on account of breakage. Definition of plant under S. 43(3) is patently applicable for claims under Ss. 28 to 41. As such claim under Ss. 32 and 32A was allowable on items of plant covered under definition vide S. 43(3).

10. The assessee has maintained the books of accounts, records, vouchers, bills and other supporting evidence which were duly produced at the assessment stage. The assessee has submitted full details and particulars of balance sheet and P&L; account items which were examined and verified were placed on record. The ITO has pointed out no defect in the books of accounts or no item of disallowable nature or of the nature of personal expenses. He has made disallowance on estimate out of various items of revenue expenses alleging that the same are attributable to personal use of the directors. The expenses claimed are all related to business supported by bills, vouchers, evidences and are fully vouched and verifiable.

11. These are the narrations of the assessee-company contained in paragraphs 3 and 4 of the statement of facts. The relevant documents were very much produced before the ITO for his examination. The ITO has disallowed the depreciation and investment allowance for different reasons without expressly mentioning that the assessee is not a manufacturing company.

12. When the CIT(A)s order was agitated before the Tribunal, the Tribunal proceeded on the ground that the evidence in respect of the manufacturing part of the assessees factory was not produced. It is true that the copies of the documents were not produced but even without the said documents it was very much on record consisting the books of account, balance sheet, P&L; account and other relevant vouchers coupled with the explanation regarding the claim. It was not the case that the evidence before the ITO was not sufficient.

13. At the time of hearing this miscellaneous application the learned representative Shri Verma for the assessee brought several facts to our notice, such as, consumption of raw materials purchased, power consumption, oil fuel consumption, electric expenses, manufacturing expenses, etc. According to Shri Verma, the Assessee-company purchased only flavours and scent from M/s. Parle (Exports) (P) Ltd. From the assessment order itself it can be clearly made out that the assessee-company itself is manufacturing soft drinks and it is only purchasing flavours and scent from others. Similar is the case for manufacturing soda. Under no circumstances it can be said that the assessee-company is not a manufacturing company and it is not entitled to depreciation and investment allowance on the bottles, crates and wooden shelves. The breakage claimed by the assessee-company on the bottles and crates cannot be taken in to account for disallowing the depreciation and investment allowance.

14. We have also heard the learned Departmental Representative Shri S. C. Sen who has strongly objected to rectify the order. According to him, the assessee-company did not produce evidence at the time of hearing the appeal to prove that it is a manufacturing company to claim 100% depreciation on the bottles, crates and wooden shelves and the depreciation at the prescribed rate on the plant and machinery. Depreciation is also claimed on the bottles, crates and wooden shelves trading (treating) as plant and the value of each item is below Rs. 5,000. Once having accepted that the bottles and wooden shelves constitute plant, depreciation cannot be disallowed. The said items cannot constitute stock-in-trade. The containers were returnable. The meaning of the assessee-companys affairs as understood that the assessee-company is bottling the concentrated chilled soft drinks supplied by M/s. Parle (Exports) Ltd., Bombay, and also purchased and sold Bisleri Club soda from the said company, is not a correct fact. This conclusion is not in consonance with the assessment order coupled with audited balance sheet and P&L; account. The Notes attached to the account provided information as to consumption of various principal raw materials like, sugar, citric acid, carbon-di-oxide, crown corks and essence. Out of the above raw materials, only essence is supplied by M/s. Parle (Exports) Ltd., Bombay and other materials are procured by the assessee-company from the established sources. The assessee was sanctioned electrical power from the State Electricity Board to the tune of 245 K. V. A. The assessee paid power charges of Rs. 1,09,419 during the relevant accounting period under consideration. The assessee has also licence under the Central Excise & Salt Act., 1944. The assessee was paying the prescribed duty of excise of the appropriate authority.

15. The process employed by the assessee comprises of purification and softing of water, preparation of raw and ready sugar syrup with the help of steam jacketed steel tanks and oil fired boiler, carbonation and flavouring of syrup, filing into the bottles with automatic fillers, processing the bottles for removal of dirt and bacteria with the help of automatic crower. These facts suggest that the assessee-company is engaged in manufacturing activity holding licences under the Factories Act, 1948, the India Boilers Act and the Employees State Insurance Act, 1948, required for manufacturing process carried on by the assessee. The assessee also employed the same process for Bisleri Club Soda except preparation of syrup and adding of flavours.

16. The Assessing Officer has not discussed anything for disallowing capitalisation of preoperative expenses to the plant and machinery, on the other hand, it is held that the preoperative expenses capitalised by the assessee has no nexus with the assets and plant to confirm the disallowance. The Assessing Officer has not at all discussed and had not adduced any reason for disallowing capitalisation of preoperative expenses to the plant and machinery. All that he has considered is that 'the investment allowance has been claimed on the cost of plant and machinery inclusive of preoperative expenses amounting in all to Rs. 59,66,007. But the actual cost of plant and machinery is Rs. 57,80,718. Accordingly a sum of Rs. 10,83,885 is found allowable to the company for future set off' (vide page 3 of the assessment order dt. 20th Feb., 1988). Aggregating the actual cost of plant and machinery is Rs. 57,80,718 (i.e. without capitalising the preoperative expenses) the investment allowance works out to be Rs. 14,45,180 and the ITO has computed Rs. 10,83,885. This goes to show that the ITO has completed the assessment in haste without verifying the facts before him. Even the CIT(A) in his order dt. 29th Nov., 1988, has stated that the preoperative expenses capitalised by the assessee has no direct nexus to the assets and plant. To justify this finding no reasons are adduced.

17. As per audited balance sheet filed before the ITO it may be seen that the expenses in the nature of preoperative expenses capitalised to the assets are incurred during the construction and installation of plant. Disallowance of all the expenses including the interest during implementation period and loan raising expenses in toto is not in accordance with established principle of low. It is a practice to capitalise the preoperative expenses incurred during the construction period to the assets and the same is supported by several decisions. Even according to the accepted accounting principles this preoperative expenses require to be capitalised.

18. It is held in the appellate order of the Tribunal that the assessee-company is not a manufacturing company and it is not entitled for depreciation. The preoperative expenses are also not allowable fully to capitalise. The facts go to show that the assessee-company is a manufacturing company and it is entitled to 100% depreciation on bottles, crates and wooden shelves. Even without looking into the documents filed at the time of hearing this miscellaneous application, this meaning can be easily construed from the facts considered by the Assessing Officer in the assessment order and the documents produced before him at that time. The statement of fact of the assessee produced before us at the time of hearing of the appeal also cannot be discarded without giving a finding that the statement of facts is either false or incorrect. As the Tribunal has not considered the facts properly, therefore, a mistake of fact is apparent on the face of the order of the Tribunal. If this mistake of fact is rectified, the assessee is entitled to get relief of 100% depreciation on bottles, crates and wooden shelves and not the depreciation at the prescribed rate on the plant and machinery. The assessee is entitled to capitalise the correct preoperative expenses.

19. It is correctly argued by the learned Departmental Representative Shri S. C. Sen that if the assessees application is allowed then it would amount to revival of the order. It is well settled principle that while rectifying the mistake apparent there may be revival of the order, but that does not mean that the mistake apparent should not be rectified. Because of that, the mistake should not be rectified cannot be a correct proposition. If technicalities are very serious, they cannot be ignored. But technicalities of non-production of copies of some of the documents in support of the claim before the Tribunal and produced at the time of hearing of the miscellaneous application does not mean it should be discarded without looking into it. We are meant to do substantial justice and doing the substantial justice means the rightful claim of the assessee should not be rejected. I am not on the point that the evidence now produced at the time of hearing of this miscellaneous application but even without taking into consideration that evidence I am of the opinion, the evidence which was before the Assessing Officer at the time of making assessment was sufficient to arrive to the correct conclusion that the assessee is a manufacturing company and it is entitled to depreciation as prayed. The rightful claim of the assessee should not be disallowed on mere technicality of nor producing the evidence before the Tribunal. The lawful claim of the assessee is based on the production of the books of account, audited balance sheet, P&L; account and other relevant evidence produced by the assessee at the time of making assessment. Therefore, in my opinion, there is an apparent mistake on the face of the order in holding that it is not a manufacturing company and not entitled to depreciation as prayed. On the basis of these facts, in my considered opinion, there is a mistake apparent and the assessees miscellaneous application requires to be allowed. I am fortified in my conclusion by the decision of the Supreme Court in the case of Distributors (Boroda) Pvt. Ltd. vs. Union of India & Ors. : [1985]155ITR120(SC) .

20. In the result, the miscellaneous application is allowed by holding that the assessee is a manufacturing company and it is entitled to 100% depreciation on the bottles, crate and wooden shelves and the depreciation at the prescribed rate on plant and machinery and the proportionate capitalisation of the pre-operative expenses.