TaxTMI 
TaxTMI 
1985 (6) TMI 72
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....anufacture of the asset by the stipulated date of delivery and there was much further delay. The assessee, therefore, sought for compensation from the Bombay company to the extent of Rs. 46,000 of which the break up was as under: Rs. 1. Additional cost we had to pay to get the machinery from other sources 26,000 2. Interest for Rs. 15,500 calculated at 12 per cent for 6 months 930 3. The loss on account of delay in 19,070 production -------------- 46,000 -------------- This was by a letter dated 1-2-1977. However, eventually a settlement was arrived at and the Bombay concern paid the assessee Rs. 16,000 in February 1977. Subsequently, the assessee placed an order with another concern in Ernakulam in April 1977 and obtai....
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....he learned departmental representative sought to raise an additional ground which is really an alternative contention. This was to the effect that since the assessee was allowed capitalisation of expenditure incurred prior to setting up of the business, the receipt of Rs. 16,000 should go to reduce the expenditure and, thus, the capital cost would stand reduced on general principles. This plea was also opposed by the learned counsel for the assessee submitting that the ITO had only invoked the provisions of section 43(1) and the revenue should either stand or fail by the provisions which had been relied on. 5. We have considered the rival submissions. The relevant portion of section 43(1) reads as under : "'actual cost' means the actual c....
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.... to meet directly or indirectly any portion of the cost of the asset paid by the assessee to the third party. Hence, no deduction could be made under section 43(1) on the ground that a portion of the cost of the asset subsequently acquired was met directly or indirectly by Dave Trading Co. It is, therefore, not necessary to advert to the cases relied on behalf of the assessee as this part of the contention of the assessee has been found acceptable by us. 7. Coming to the alternative contention of the revenue, the decision of the Supreme Court in Challapalli Sugars Ltd. v. CIT [1975] 98 ITR 167 is an authority for the proposition that the accepted accountancy rule for determining cost of fixed assets is to include all expenditure necessary ....