Law:

Section:

Section 43, read with section 33 of the Income-tax Act, 1961 (corresponding to section 10(5), read with section 10(2)(vib) of the Indian Income-tax Act, 1922) - Actual cost - Assessment year 1961-62 - Whether notwithstanding receipt of certain contributions from Government or public or local authorities, "actual cost" will have to be amount spent on assets in respect of which development rebate is claimed - Held, yes Words and phrases : Expression 'actual cost' as occurring in Explanation to section 10(5) of Indian Income-tax Act, 1922. FACTS The assessee, was a company which generated and distributed electricity. During the relevant previous year the assessee-company installed machinery of the total value of Rs. 53,44,232. It claimed development rebate amounting to Rs. 13,36,060 on the said machinery under section 10(2)(vib) of the Act. Admittedly, for installing this machinery the assessee had received contributions of Rs. 1,36,436 from the Government or public or local authorities. In determining the actual cost on the basis of which the development rebate was claimed, the assessee did not deduct these contributions amounting to Rs. 1,36,436 from the total value of Rs. 53,44,232. Incidentally, it might be stated that for the purpose of depreciation the claim was made on the net cost after deducting contributions received from the Government or public or local authorities. The ITO took the view that definition of the expression 'actual cost' occurring in the Explanation to section 10(5) clearly provided for a deduction on this account. He, accordingly, deducted the contributions received from the Government or public or local authorities and allowed development rebate on the balance. The amount actually allowed came to Rs. 13,35.025. The matter was carried in appeal by the assessee-company to the AAC, who confirmed the ITO's order. He rejected the assessee's contention that the ITO was not correct, in taking the view that the Explanation under section 10(5) would also cover the item of development rebate under section 10(2)(vib). The matter was carried in second appeal by the assessee-company to the Appellate Tribunal and the assessee-company raised the…

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