One-time motor vehicle tax forms part of actual cost when paid to put cars into intended use, not revenue deduction.

A one-time motor vehicle tax paid under the Bombay Motor Vehicles Tax Act, 1958 for cars acquired for use in Maharashtra was treated as part of the actual cost of the vehicles, because it was a statutory precondition for bringing the capital asset into intended use and was akin to registration charges. Applying section 43(1) of the Income-tax Act, 1961, the amount was held to be attributable to making the cars workable rather than a deductible revenue outgoing under section 37(1). Section 12A of the State tax law was held to regulate payment and enforcement only, and the amended levy was not shown to be merely a substitute for annual revenue payments.

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Issues: Whether the one-time motor vehicle tax paid under the Bombay Motor Vehicles Tax Act, 1958 on cars acquired for use in Maharashtra was capital expenditure forming part of the actual cost of the vehicles and eligible only for depreciation, or revenue expenditure deductible under section 37(1) of the Income-tax Act, 1961.

Analysis: The vehicles were capital assets intended for use in Maharashtra. Under section 3 of the Bombay Motor Vehicles Tax Act, 1958, the levy was a one-time tax for the lifetime of the vehicle and was payable for the right to use or keep the vehicle for use in the State. Under section 43(1) of the Income-tax Act, 1961, actual cost is determined on commercial accounting principles unless a statutory mandate provides otherwise. Applying that principle, the amount paid to make the vehicles available for their intended use constituted an attributable cost of bringing the asset into working condition, akin to registration charges. Section 12A of the Bombay Motor Vehicles Tax Act, 1958 did not change the character of the levy; it only regulated payment and enforcement. The argument based on the pre-amendment annual levy was rejected because the amended law imposed a different levy, and the payment was not shown to be in lieu of a series of annual revenue payments.

Conclusion: The one-time motor vehicle tax formed part of the actual cost of the motor cars and was capital in nature. The deduction under section 37(1) was not allowable.

Ratio Decidendi: A statutory levy paid as a precondition for bringing a capital asset into its intended use forms part of the asset's actual cost, unless the taxing statute or the Income-tax Act expressly provides otherwise.

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