TMI Blog1994 (5) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... nd disallowances were made. Admittedly, the assessee acquired certain assets (plant and machinery) making use of the Deferred Payment Guarantee Scheme of the Industrial Development Bank of India (I.D.B.I.). The interest payable over a period of time was capitalised in one lump sum and added to the cost of the assets and depreciation was claimed thereon and that has been disallowed by the Assessing Officer. So also part of the investment allowance on the interest payable after the plant and machinery could be used was also disallowed. The amount of the disallowance over which investment allowance and depreciation was disallowed was stated to be Rs. 20,22,798 in the assessment order. In appeal, the learned C. I.T. (A), purporting to follow the decision of this Tribunal in the case of India Pistons Repco Ltd. v. IAC [1988] 261 ITD 413 (Mad.), allowed the claim of the assessee and ordered that depreciation will be granted on the value of the assets, including the capitalised interest. The Revenue is aggrieved against this relief granted to the assessee and directed ground Nos. 1 to 2.3 over this. 3. India Pistons Repco Ltd. is a sister concern of the assessee-company. The said comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly the actual price of the asset even, if it be something more than what would have been paid if the entire amount had been paid at the time of the purchase itself, without having the deferred payment facility, because the invoice gave only the total price including financial charges. It was also clear that the difference between the total amount of instalments and the actual amount paid was computed by adding the interest payable on the amount over the period of the deferred payment facility, though called financial charges. Yet, what was paid was only the enhanced price. So far as the assessee was concerned, they had not taken any loan from any bank or financial institution for the deferred payment facility. Ultimately the Tribunal no doubt held that the whole of the interest payable should be included to make out the actual cost of the asset under section 43(1) and despite Explanation 8 introduced with retrospective effect from 1-4-1974, depreciation is held allowable on the whole cost of plant and machinery plus interest, on all the instalments payable, under the Deferred Payment Scheme of the I.D.B.I. 4. However, the same scheme was differently interpreted by the Bombay High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t had also considered the Karnataka High Court decision in CIT v. Widia (India) Ltd. [1992] 193 ITR 475. They were pleased to find in their judgment commenting upon the Karnataka High Court's decision as follows at page 521 of the reported judgment : " We have carefully considered the above observations. We have also per-used the Bills Rediscounting Scheme of the Industrial Development Bank of India. On perusal of the scheme, we find that the above observations of the Karnataka High Court in regard to the IDBI Scheme and the nature of payment thereunder are not correct." Then the Bombay High Court had closely examined the Bills Rediscounting Scheme of the I. D. B. I. and the mechanism of the scheme was set out by them at pages 521 522, which is as follows : The intending purchaser-user of indigenous/imported machinery who is not in a position to offer immediately full cash payment for the required machinery approaches the machinery manufacturer/local agent of foreign supplier seeking deferred payment facility. The latter, in order to promote his sales, agrees to supply the machinery subject to payment of an agreed minimum amount in advance and the balance in half-yearly or year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock was Rs. 68,484. The Assessing Officer disallowed the same under section 43B on the ground that it was a provision and not an actual payment. The assessee's claim was allowed by the first appellate authority following the decision of the Gujarat High Court in the case of Lakhanpal National Ltd. v. ITO [1986] 162 ITR 240. 6. After hearing both sides, we fail to understand how it would be possible to get the raw material from abroad unless customs duty is paid at the time when the stocks are cleared for transportation by the assessee. In fact, a similar issue had cropped up before the High Court. The question that arose for consideration was whether import duty/customs duty were deductible expenses. The objection raised by the Assessing Officer was that the excise duty and customs duty were included as cost elements in the closing stock as per the established method of accounting and would be automatically allowed in the subsequent year as part of the opening stock. Questioning the ITO's order, the assessee filed a writ petition before the Gujarat High Court. In the headnote at page 241 their Lordships held that in fact, the raw material was imported and the goods were manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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