TMI Blog1985 (5) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... m of Rs. 15,28,933 was shown as the cost of building in the accounts of the assessee. According to the Income-tax Officer, the following items were not to be taken into consideration for the purpose of allowing depreciation Rs. (1) Tax paid prior to start of the cinema 30,899 (2) Interest paid to banks 1,48,525 (3) House tax 11,345 (4) Ground rent 57,200 These amounts were not included by the Income-tax Officer for the purpose of computing the actual cost of the building. The Appellate Assistant Commissioner on appeal allowed the claim regarding interest paid to banks on the basis of the judgment in CIT v. Standard Vacuum Refining Co. of India Ltd. [1966] 61 ITR 799 (Cal). On appeal by the assessee to the Tribunal, the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is case was covered by the judgment of the Supreme Court in Challapalli Sugars Ltd. v. CIT [1975] 98 ITR 167. In actual fact, that case merely confirms the judgment of the Calcutta High Court in CIT v. Standard Vacuum [1966] 61 ITR 799. The amount, which was in question, was the interest paid on borrowed money. It was held that accountancy practice had to be followed. The Supreme Court stated the proposition as follows : " In finding the answer to the question mentioned above, we have to bear in mind that it arises in the context of profits or gains of business and the permissible deductions on account of depreciation and development rebate relating to the machinery and plant of the assessee. As the expression 'actual cost' has not been d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... built or not. So, we cannot see how they can be treated as part of the cost of the building, i.e., the cinema itself. No principle of accountancy has been brought to our notice which would allow the ground rent or the house tax or other corporation taxes being treated as a part of the actual cost of the cinema. Numerous other cases were cited before us. But, in each case, there was some nexus between the expenses and the actual cost. We are unable to discover the nexus between the ground rent, house tax and the corporation tax and the construction cost of the building. Learned counsel for the assessee urged that under the terms of the lease, a cinema building had to be constructed within a fixed period, so the tax paid during the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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