1989 (7) TMI 178 - AT - Income Tax

Tribunal includes CIF value in asset cost for tax benefits, rejects exclusion argument.

The tribunal ruled in favor of the assessee, holding that the CIF value of machinery received under Norwegian Aid should be included in the calculation of ... Actual Cost, Additional Depreciation, Computing Depreciation, Investment Allowance, Plant And Machinery Issues:1. Calculation of depreciation, investment allowance, and additional depreciation on machinery received under Norwegian Aid.2. Interpretation of section 43(1) and Explanation 2 of the Income-tax Act, 1961 regarding the actual cost of assets acquired by way of gift or inheritance.The judgment deals with a dispute regarding the calculation of depreciation, investment allowance, and additional depreciation on machinery received under Norwegian Aid. The assessee claimed these allowances based on the total value of the machinery received, while the Income-tax Officer (ITO) allowed the allowances on a lower value, excluding the CIF value of the machinery. The disagreement centered on whether the CIF value should be considered in calculating the allowances. The CIT(A) held that the CIF value should be included, relying on Explanation 2 to section 43(1) of the Income-tax Act, 1961. The department appealed this decision.The tribunal analyzed the agreement between the assessee and the Government of India, which outlined the receipt of the machinery as part of a Boat Building Programme under Norwegian Aid. The tribunal noted that the machinery was given to the assessee as a gift from the Norwegian Government through the Government of India. The tribunal emphasized that whether considered a gift from the Government of India or Norway, the legal position regarding the cost to the assessee remained the same.Regarding the interpretation of section 43(1) and Explanation 2, the tribunal held that the actual cost of the asset to the assessee, acquired by way of gift, should be determined based on the written down value of the previous owner or the market value on the date of acquisition, whichever is less. The tribunal rejected the department's argument that the CIF value should not be considered, emphasizing that the CIF value represented both the value in the hands of the previous owner and the market value on the date of acquisition. The tribunal cited relevant case law to support its interpretation of the law.The tribunal discussed the historical context of the relevant provisions and confirmed the order of the CIT(A) that the CIF value of the machinery should be considered in calculating the allowances. The tribunal rejected the department's grounds and upheld the decision in favor of the assessee, emphasizing the application of Explanation 2 to determine the actual cost of the asset acquired by way of gift.