TaxTMI 
TaxTMI 
1985 (6) TMI 72
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....er, did not even commence manufacture 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: &nbs....
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.... 930 3. The loss on account of delay in 19,070 production &nb....
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....sp; -------------- 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 obtained the machinery at a much enhanced cost. In this assessment year, for which the accounting period is from 1-4-1977 to 31-3-1978, the assessee claimed depreciation on machinery. The ITO worked out the capital cost and in so doing made a deduction of Rs. 16,000 under s....
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....pt 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 cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority:" It is clear that in terms of section 43(1) the actual cost of asset to the assessee, according....
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....y 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 to bring such assets into existence and to put them in working condition. So, if there are outgoings they will be capitalised. If there are receipts which have a bearing on the outgoings then the receipts would have to be set off against the outgoings a....