Law:

Section:

Section 43(1), read with explanation 2 thereto, of the Income-tax Act, 1961-Actual cost-Assessee imported two second hand cranes gifted to it by its parent company after paying customs duty on their CIF value which was much less than their original cost to donor-Import licence was granted on express condition that cranes would not be sold or disposed of otherwise-Assessee claimed depreciation and development rebate on market value of cranes as estimated by approved valuer which was much higher than value shown in import licence-ITO accepted figures, given in import licence plus expenses incurred, as the market value for determining actual cost-AAC, however, held that original cost to donor, which would be written down value for purposes of Income-tax in India under section 43(1) and was less than market value estimated by valuers, should be taken as actual cost-Whether tribunal rightly reversed AAC's decision and restored ITO's order-Held, on facts, yes Facts For the assessment year 1967-68, the assessee had shown the value of two cranes, received from its parent company in the UK as gift, at Rs. 4,50,000. The import licence for these two cranes, however, disclosed their CIF value at Rs. 67,027 only and the assessee had incurred expenses amounting to Rs. 26,752 inclusive of customs duty on that acquisition. The main condition attached to the licence was that the cranes would be utilised by the assessee itself and would not be sold or disposed of otherwise. The assessee submitted before the ITO in connection with its claim for depreciation and development rebate that the two cranes were old but in excellent condition and their market value on the date on which these were put to use was Rs. 4,50,000, based on the valuers' report. The ITO, however, was of the view that underExplanation 2 to section 43(i), the actual cost would be either the written down value in the hands of the donor or the market value at the time of acquisition of the assets, whichever was less. In the absence of any depreciation having been allowed on the ground of non-utilization of the cranes in India prior to the relevant year, the ITO did not consider the written down value in the hands of…

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