TMI Blog1991 (3) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer to recompute the investment allowance and grant the deductions ? (2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in allowing depreciation and investment allowance claimed by the assessee on the capitalised amount of Rs. 13,79,406 paid/payable in instalments in respect of capital assets under the deferred payment scheme ? (3) Whether, on the facts and circumstances of the case, the Tribunal was right in holding that excess available surplus carried over from the earlier year under the provisions of the Payment of Bonus Act cannot be treated as an outgoing and hence is not eligible for deduction ?" The first question is covered by the decision of this court in CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re to be paid by bills of exchange payable to the State Bank of Mysore or IDBI. Accordingly, on December 13, 1977, the assessee gave ten usance bills for an aggregate amount of Rs. 42,048 and took delivery of the machine on December 10, 1977. Each of these bills was drawn in favour of Jyothi Industries for value received and payable after the stipulated period. However, only a sum of Rs. 31,860 was capitalised in the balance-sheet of the assessee and the balance was treated as an outstanding liability. The aggregate of such liabilities in respect of such transactions came to Rs. 13,79,406. On these facts, the claim of the assessee is that these amounts which represented discounting charges formed part of the price of the machinery purchased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the actual cost of the machinery. Consequently, the decision in CIT v. Tensile Steel Ltd. [1976] 104 ITR 581 (Guj) was relied on and the claim of the assessee allowed. Learned counsel for the Revenue repeated some of the contentions as were urged before the Appellate Tribunal. To appreciate the respective contentions, it is necessary to note the provisions of sections 32 and 32A. Both under section 32 as well as section 32A, the amount which shall be considered either for depreciation or for investment allowance is the actual cost of the machinery owned by the assessee. In the instant case, there is no dispute that the machinery was used for the business of the assessee, but the contention seems to be that the ownership was postponed as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 43 of the Act. At page 175, the Supreme Court pointed out that the interest incurred before the commencement of production on such borrowed money can be capitalised and added to the cost of the fixed assets as per accountancy rules. According to the Supreme Court, the accepted 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 construction 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 created as a result of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has parted with the entire amount by handing over the negotiable instruments. The difference arose only because the seller chose to encash the negotiable instruments, because of the facility made available by the IDBI. It cannot be said that every kind of concession results in the payment of interest. Nowhere the contract envisages the payment of interest and it was not the case of the Revenue also that there was any term for the payment of interest specifically. The ratio of the decision of the Gujarat High Court in CIT v. Tensile Steel Ltd. [1976] 104 ITR 581 would be applicable to the facts of the instant case, even though Explanation 8 to section 43(1) was retrospectively added in the year 1986, with effect from April 1, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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