Capital investment under an exemption scheme includes credit-purchased fixed assets where a legal payment liability exists.

The expression "acquired and paid for" in a sales tax exemption scheme was construed contextually to include fixed assets obtained on credit against an existing legal liability to pay. The Court held that "capital investment" is not limited to amounts already discharged in cash, and that excluding unpaid supplier liabilities would defeat the incentive scheme and create irrational distinctions between cash purchases and credit-funded acquisitions. The relevant factor was the obligation incurred for eligible fixed assets, not the source of financing or the timing of payment. The exemption basis was therefore directed to be recomputed, with consequential revision of the related subsidy computation.

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Issues: Whether, for the purpose of computing eligible fixed capital investment under the sales tax exemption scheme, the unpaid liability to the supplier for land, building, plant and machinery acquired on credit must be excluded merely because the price had not yet been actually paid.

Analysis: The exemption notification issued under section 49(2) was treated as subordinate legislation and construed in the light of the scheme and object underlying the contemporaneous Government Resolution. The expression "capital investment" was held to be context-dependent and not a term of fixed or universal meaning. Reading the words "acquired and paid for" literally as requiring immediate actual payment would make the scheme unworkable, create irrational distinctions between purchasers who borrow from financial institutions and those who obtain credit from the supplier, and defeat the incentive objective. The relevant consideration was the legal obligation incurred for acquiring the eligible fixed assets, not the source of credit or the timing of discharge of that liability. The scheme contemplated investment in specified fixed assets at their actual price liability, and not mere market value or assets obtained without incurring any payment obligation.

Conclusion: The unpaid amount payable to the supplier could not be excluded from eligible fixed capital investment merely because payment had been deferred; the petitioner was entitled to recomputation of the exemption basis accordingly.

Final Conclusion: The Court granted the writ and directed fresh computation of the eligible fixed capital investment and consequential tax exemption, and the connected subsidy computation was also to be revised in the same manner.

Ratio Decidendi: Where a fiscal incentive scheme uses the expression "acquired and paid for" in relation to specified capital assets, the phrase covers assets acquired on credit against an existing legal liability to pay, and not only assets whose price has already been discharged in cash during the scheme period.

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