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December 2008

Investment allowance : S. 32A : Computation : Agreement providing for escalation of price : Extra amount paid to be taken into account

By K. B. Bhujle, Advocate
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29 Investment allowance : S. 32A of
Income-tax Act, 1961 : A.Y. 1986-87 : Computation : Actual cost to be determined
in each year : Agreement providing for escalation of price : Extra amount paid
in relevant year to be taken into account.


[DCIT v. Official Liquidator, 305 ITR 418 (Mad.)]

The assessee had imported machinery from Italy for polynostic
staple fibre plant and installed it in the accounting year relevant to the A.Y.
1981-82. The agreement for purchase provided for an escalation clause. In
pursuance of the escalation clause, the assessee made certain payments towards
cost of escalation of the machinery and escalation in the customs duty and
technical consultancy fees. The total payments amounted to Rs.1,40,60,651. For
the A.Y. 1986-87, the assessee filed a revised return wherein the investment
allowance was enhanced to Rs.47,20,648 from Rs.10,55,608 as originally claimed.
The Assessing Officer allowed the claim, but the Commissioner acting u/s.263
rejected the claim. The Tribunal set aside the order of the Commissioner.

 

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