TaxTMI 
TaxTMI 
1979 (1) TMI 166
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....e expenditure and deleted the addition of Rs. 19,231. 3. The Department is in appeal. It is contended that relying on the decision of the Calcutta High Court in the case of CIT vs. Fort Gloster Industries Ltd. (1) which was referred to by the Madras High Court with approval in the case of CIT vs. R.G. Balakrishnan and Bros. (P) Ltd. (2) which judgment in its turn was approved of by the Supreme court in the case of Challapalli Sugars Ltd. vs. CIT(3) that the expenditure of Rs. 19,231 which was paid to the Bank as guarantee commission was rightly disallowed as capital expenditure. 4. The ld. counsel for the assessee on the other hand referred to an order of the Tribunal in ITA. Nos. 1197 & 1198 (Mds)/77-78 dated 22nd July, 1978 and subm....
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....ther judgments of this Court and the Bombay High Court: In CIT vs. Standard Vacuum Refining Co. Of India Ltd. At page 803 it is stated that 'Actual cost' to the assessee includes all costs essential to the acquisition of a capital asset. The Bombay High Court in Habib Hussein vs. CIT at page 875 "The dictionary meaning of the word 'cost' is 'what is laid out or suffered to obtain anything'. In our opinion therefore the meaning of the expression 'actual cost to the assessee as used in sub-s. (5) of s.10 of the Act would be what the assessee has in fact expended or laid out for the purpose of acquiring the depreciable assets." The Calcutta High Court in CIT vs. Lothian Jute Mills Co. Ltd. At page 636 stated: "It would therefore appea....
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....e had incurred for payment of commission to the bank was essential for acquisition of the machinery the assessee had ordered for and this sum should be treated as part of the assessee's "actual cost." In the case of Challapalli Sugars Ltd. vs. CIT the Supreme Court has observed as under: In statement on Auditing Practices issued by the Institute of Chartered Accountants of India (1974) it is observed in paragraph 2.5 as under: 2.5 Fixed Assets should be valued at cost and depreciation should be written off on a proper and consistent basis. Cost included all expenditure necessary to bring the assets into existence and to put them in working condition. By way of illustration the following may be mentioned: (i) Legal charges and st....
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....ed accountancy rule for determining the cost of fixed assets is to include all expenditure necessary to bring such assets into existence and to put them in working condition. In case money is borrowed by a newly started company which is in the process of constructing and erecting its plant the interest incurred before the commencement of production on such borrowed money can be capitalised and added to the cost of the fixed assets which have been created as a result of such expenditure. The above rule of accountancy should in our view be adopted for determing the actual cost of the assets in the absence of any statutory definition or other indication to the contrary". From the above observations it may perhaps be argued that in respect o....