TMI Blog1981 (8) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of grant of depreciation allowance under section 32 of the Income-tax Act, 1961 ? (2) Whether, on the facts and in the circumstances of the case, the interest expenditure of Rs. 5,52,936 relating to the bank overdraft utilised for erection of the factory forms part of the 'actual cost' of the assets to the assessee for the purpose of grant of depreciation allowance under section 32 of the Income-tax Act, 1961? (3) Whether, on the facts and in the circumstances of the case, the expenditure of Rs. 38,792 incurred on the inauguration ceremony of the factory is allowable as deduction in terms of sub-section (1) of section 37 of the Income-tax Act, 1961 ? " In order to appreciate the points involved, the facts may be briefly stated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but upheld both by the AAC and the Income-tax Appellate Tribunal. This is the point involved in question No. 2. The expenses aggregating to Rs. 38,792 had been incurred at the time of inauguration of the assessee-company's factory. The ITO held that any such expenditure could not be allowed as revenue deduction in view of the provisions of s. 37 of the I.T. Act, 1961. The AAC and the Income-tax Appellate Tribunal have subsequently, in further appeals, upheld the assessee's contention. Mr. Joshi on behalf of the Commissioner has agreed with the learned counsel for the assessee that as far as question No. 2 is concerned, the same appears to be concluded against the Commissioner by a decision of the Supreme Court in Challapalli Sugars Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l assets acquired by the assessee-company would be required to be included in the term 'actual cost' of the asset. It was further observed that it would not be correct to treat the word 'actual cost' to mean the cost paid to the vendors for the asset alone. It was held that the term 'actual cost' was required to be liberally construed. Once the above principle has been correctly understood and appreciated, it must follow that the AAC and the Income-tax Appellate Tribunal were right in holding that the expenditure of Rs. 27,385 incurred in the present case on the ceremony of laying the foundation formed part of the actual cost of the assets to the assessee and that depreciation allowance was required to be granted on such assets. In passin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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