Actual cost includes construction expenditure needed to bring factory assets into usable condition for depreciation relief.

Expenditure incurred in bringing a factory asset into existence and into usable condition is treated as part of its actual cost. The text states that construction-related outlay was capitalised and allocated to the factory building, plant and machinery, and electric installations, so it formed part of the fixed asset base for depreciation. On the same principle, the amount was also regarded as relevant to relief under section 84 of the Income-tax Act, 1961. The operative point is that capital expenditure necessary to make the asset usable is includible in actual cost for depreciation and allied statutory reliefs.

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Issues: Whether expenditure incurred during construction of a factory was includible in the actual cost of the factory building, plant and machinery and electric installations for the purpose of depreciation and relief under section 84 of the Income-tax Act, 1961.

Analysis: The expenditure of Rs. 89,900, incurred in the course of constructing the factory, was capitalised and allocated to the factory building, plant and machinery, and electric installations. The question was whether this capitalised outlay formed part of the cost of the fixed assets for depreciation and for relief under section 84. The answer was governed by the settled principle that expenditure necessary to bring the asset into existence and into usable condition is part of its actual cost.

Conclusion: The amount was held to be includible in the actual cost of the fixed assets and to qualify for depreciation and relief under section 84, in favour of the assessee.

Ratio Decidendi: Expenditure incurred in bringing a capital asset into existence and into usable condition forms part of its actual cost for depreciation and allied statutory reliefs.

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