TaxTMI 
TaxTMI 
2007 (2) TMI 115
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....nbsp; right in law in holding that the interest paid under deferred payment scheme under which certain assets acquired is capital in nature and investment allowance is allowable on the same?" 2. The assessment years with which we are concerned are 1982-83 and 1985-86. The assessee is a company. The assessee claimed investment allowance on the interest paid under the deferred payment scheme through which certain assets were acquired, which was negatived by the assessing officer. 3. The Commissioner of Income-tax (Appeals) allowed investment allowance holding that the interest accrued under the deferred payment scheme is capital e....
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....qual, the interest component would be higher with the passage of time. The manufacturer was required to present the bill at the bank of the purchaser for discounting within two months and the bank, in turn, would present the bill for rediscounting with I.D.B.I. 8. According to the assessee, the total amount of the instalments including the interest is the actual cost of the assets purchased within the meaning of section 43(1) of the Income-tax Act, 1961 (in short "the Act"), the relevant portion of which reads as under: "43(1). 'actual cost' means the actual cost of the assets to the assessee, reduced by ....
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....sp; deferred payment is quite distinct from either interest paid on capital borrowed or interest paid on unpaid price and hence, Explanation 8 to section 43(1) of the Act has nothing to do with the enhanced price of goods sold under the I.D.B.I. Scheme. 11. In our view, Explanation 8 to section 43(1) of the Act, inserted with effect from April 1, 1974, should not be construed in the way as adopted by the Appellate Tribunal. A reading of the Explanation 8 to section 43(1) of the Act shows that it was added with the object of removing doubts with regard to the includibility of interest relatable to any period after the asset has first been put to use, in the comp....
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....bsp; mentioned therein would not be includible in the actual cost. The very purpose of this amendment was to clarify the position in this regard and to set at rest the controversy that had arisen, vide CIT v. Rajaram Bandekar (202 ITR 514 - Bombay High Court). 12. Applying the ratio laid down by the Bombay High Court in CIT v. Rajaram Bandekar, cited supra, this Court in CIT v. India Pistons Ltd. (242 ITR 672), held as follows: "In the instant case, depreciation has been claimed on interest payable on a deferred payment scheme which is identical to the facts involved in the case decided by the Bombay High Court reported in CIT v. Rajaram Bandekar&nb....