1. This is an appeal of the revenue for the assessment year 1978-79.
The IAC is aggrieved with the order of the Commissioner (Appeals) about his finding firstly about expenditure incurred of Rs. 32,256 and Rs. 50,652 to be on account of machinery and not on building and thereafter allowing investment allowance on these two amounts and, secondly, allowing higher rate of depreciation of 15 per cent on electric furnaces by treating them as 'machine tools' instead of general machinery. We will deal with these points separately in succeeding paragraphs.
2. We will first take up first objection relating to the items of expenditure of Rs. 32,256 and Rs. 50,652. The first amount was incurred on crane gantry supports and stanchions and their foundations. It was explained by the assessee's authorised representative, Shri R.K.Bansal, chartered accountant, that stanchions meant pillars and the entire expenditure related to the structure erected as supports for a travelling crane. The proper word may be a mobile crane fixed in the shed. In brief, the submission of Shri R.K. Bansal was that the structure was built to instal the mobile crane, and included the foundations. The second item of expenditure of Rs. 50,652 was on account of electric switch room (16' 10") sub-station for embedding the transformer. It was explained on behalf of the assessee that this was also a structure erected for installation of the transformer of the sub-station and not that a building was constructed first in which the transformer was installed later. In support of the proposition that the expenditure was again in the nature of installation of machinery reliance was placed on a decision of the Bombay Bench of the Tribunal in ITO v. A.L.I. (P.) Ltd.  Tax. 49(6)-109. Alternatively, it was submitted on behalf of the assessee that relying on the Madras High Court decision in Addl. CIT v. Madras Cements Ltd.  110 ITR 281 the expenditure in both the cases was incurred in respect of an item of 'plant' on which again investment allowance would be rightly admissible. The arguments of the revenue, in brief, in both the cases were that the expenditure incurred was in respect of building, which could not be treated either as an expenditure forming part of cost of machinery or incurred on plant.
3. We have considered the submissions of both the sides and find that in the first instance the expenditure under both the heads is to be treated as part of cost of machinery and, therefore, the investment allowance has been correctly allowed by the Commissioner (Appeals). In this connection, we will refer to the Supreme Court authority in Challapalli Sugars Ltd. v. CITCIT v. Hindustan Petroleum Corpn. Ltd.  98 ITR 167 which deals with the scope of expression'actual cost'. The Supreme Court after taking note of accepted accountancy rule for determining cost of fixed asset has laid down that actual cost will include all expenditure necessary to bring such fixed assets into existence and to put them in working condition. Applying this test in respect of the mobile crane and the electric switch room sub-station for embedding the transformer the expenditure under both the heads would form part of actual cost of machinery. This being so, investment allowance will clearly become admissible in both the cases. We may also mention that so far as the second item of electric switch room sub-station is concerned, the Bombay Bench of the Tribunal considered the same issue and decided it in favour of the assessee holding that the construction was merely ancillary to facilitate installation of the transformer and the construction work carried out was ancillary to the installation of the transformer.
4. Alternatively, the ratio of the Madras High Court decision in Madras Cements Ltd.'s case (supra) will justify the allowance of investment allowance on the footing that the construction in both the cases is in the nature of 'plant'. In the result, we reject the plea of the revenue in respect of these two items of expenditure.
5. The remaining objection of the revenue is to the finding of the Commissioner (Appeals) that depreciation at 15 per cent will be admissible on electric furnaces, which are treated as 'machine tools' instead of general machinery. On this point, too, we have heard the submissions of both the sides and find force in the arguments of the assessee's authorised representative Shri Bansal, which are supported by a number of publications of the Government of India in which electric furnaces have been considered as 'machine tools'. Shri Bansal had included extracts from those publications in his paper book and we will refer to them one by one. Firstly, he invited attention to Appendix II of the Import Trade Control Policy of the Government of India of 1977-78 in which a List 'A' listed the items, which were to be treated as machine tools. In this List 'A' furnaces figured under heading No. 6. Second publication of the Government of India relied upon was Hand Book of Indigenous Manufacturers of Engineering Stores - 11th edition, January 1972. This publication at item 81 had a heading of machine tools and accessories. Under this head 37 items were listed and 'Furnaces' figure at item (vii). On another page of the same publication the name of an engineering manufacturer manufacturing furnaces was given and from that party the assessee had purchased a furnace. The third publication of the Government of India is named Build MachinesBuild India. In this Chapter IX is devoted to machine tools and accessories and at pages 50-51 the range of machine tools items is described and this also included reference to furnaces of various types. The fourth publication is named The Census of Machine ToolsIndia 1968. In this at page 27 is a chart dealing with various items of machine tools and there, too, furnaces, melting electric arc shown to be part of machine tools. In the face of this technical evidence emanating from the sources of the Government of India itself, we are in agreement with the view of the Commissioner (Appeals) that depreciation at the higher rate of 15 per cent is admissible. We confirm his action and reject the contention of the revenue.