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TMI Blog2008 (6) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing grant of investment allowance for the year 1986-87 when the plant and machinery had been installed in the year 1981-82? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that investment allowance can be allowed in any year subsequent to the date of purchase or installation and having put to use?" 2. When the above appeal came up before this court for admission on February 16, 2004, the tax case was admitted on the following question of law. "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing grant of investment allowance for the year 1986-87 when the plant and machinery had been installed in the year 1981-82?" 3. The brief facts are as follows : 4. The assessment year is 1986-87 and the corresponding accounting year ended on March 31, 1986. The assessee-company filed its return of income originally July 30, 1986, admitting an income of Rs. 5,30,62,920. Later, a revised return was filed on September 14, 1986, disclosing Rs. 5,28,96,920. Subsequently, another revised return was filed on November 11, 1988, wherein investment allowance claim was enhanced to R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not in accordance with law and the same should be set aside. 6 . Learned counsel appearing for the assessee submitted that the escalation in the cost of the assets is due to the agreement between the suppliers and the assessee and the Reserve Bank of India has also approved the agreement later. The actual cost has to be computed in each of the assessment year. He further submitted that the original figure of actual cost in the year of installation can be altered on the basis of subsequent events connected within the original cost. Therefore, the Tribunal has correctly granted investment allowance by following the judgment of the Supreme reported in the case of Saharanpur Electric Supply Co. Ltd. v. CIT [1992] 194 ITR 294 and also the judgment of this court in the case of CIT v. Chengalvarayan Co-operative Sugar Mills Ltd. [2000] 242 ITR 440 and, hence the order passed by the Tribunal has to be confirmed. 7. Heard learned counsel on either side. The assessee has imported machinery from Italy for the polynostic staple fibre plant and installed them in the accounting year relevant to the assessment year 1981-82. 'There is an agreement entered into between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) in a small-scale industrial undertaking for the purposes of business of manufacture or production of any article or thing ; or (iii) in any other industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule. (c) any new machinery or plant installed after the 31st day of March, 1983, but before the (1st day of April, 1988) for the purposes of business of repairs to ocean-going vessels or other powered craft if the business is carried on by an Indian company and the business so carried on is for the time being approved for the purposes of this clause by the Central Government (2A) The deduction under sub-section (1) shall not be denied in respect of any machinery or plant installed and used mainly for the purposes of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule, by reason only that such machinery or plant is also used for the purposes of business of construction, manufacture or production of any article or thing specified in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Section 43(1) deals with the definition of "actual cost", which reads as follows : "(1) 'actual cost' means the actual cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority : Provided that where the actual cost of an asset, being a motor car which is acquired by the assessee after the 31st day of March, 1967, but before the 1st day of March, 1975, and is used otherwise than in a business of running it on hire for tourists, exceeds twenty-five thousand rupees, the excess of the actual cost over such amount shall be ignored, and the actual cost thereof shall be taken to be twenty five thousand rupees." 9 . Section 32A of the Income-tax Act deals with investment allowance which was inserted by the Finance Act, 1976, with effect from April 1, 1976. Sub-section (1) of the said section provides that in respect of a ship or an aircraft or machinery or plant specified in sub-section (2), which is owned by the assessee and is wholly used for the purpose of the business carried on by the assessee, deduction would be allowable in the previous year of acquisition or installation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uently in connection or relation with plant and machinery. Both sections 32A and 43(1) need to be interpreted liberally. The cost has to be found out in each year. There is no dispute as to the agreement between the assessee and the foreign seller. There is an escalation clause in the agreement and the further amount is raid as per the clause. Therefore, the further amount paid subsequent to the installation is also actual cost to the assessee. It is seen that there is no prohibition under the statute. Hence, the assessee is entitled to investment allowance on the said amount paid in the accounting year relevant to the assessment year 1986-87. The words "actual cost" is the subject-matter of interpretation by the Supreme Court in the case of Saharanpur Electric supply Co. Ltd. v. CIT [1992] 194 ITR 294, while granting the depreciation allowance and held at page 309 as follows : "These apart, there are clearly situations in which the actual cost does get altered prospectively and not retrospectively. One such instance is where the cost of an asset increases or decreases on account of a fluctuation in the value of the currency. Suppose an asset was purchased in 1965 for $10,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed supra, on principle, is applicable to the duty impugned in the instant case also. Hence, we are of the considered opinion that the Tribunal had rightly allowed the claim of the assessee for investment and depreciation allowance." 11. So the Tribunal has followed the principle enunciated in the judgments of the Supreme Court as well as this court stated supra and allowed the investment allowance. Therefore, the Tribunal has rightly come to the conclusion that the assessee is entitled to the investment allowance on the additional amount subsequent to the installation. The finding given by the Tribunal is based on valid materials and evidence. Learned counsel appearing for the Revenue has not produced any material or any other evidence or any case law to take a view contrary to the one taken by the Tribunal and we do not find any error or illegality in the order of the Tribunal. Hence, we are of the view that the order passed by the Tribunal is in accordance with law and the same is confirmed. In these circumstances, the question of law is answered in favour of the assessee and as against the Revenue. Accordingly, the tax case appeal fails and the same is dismissed. No costs. ..... 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