| Case ID |
ebde0173-0cfc-4be9-a7e8-d578652aba3c |
| Body |
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| Case Number |
IT REFERENCE NOS. 108 AND 109 OF 1977 |
| Decision Date |
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| Hearing Date |
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| Decision |
The court held that the amounts paid by way of ground rent, corporation tax, and house tax cannot form part of the actual cost of the cinema building for the purpose of allowing depreciation allowance. The Tribunal's decision to capitalize the corporation tax and house tax was upheld, but the ground rent was not included. The rationale was that these costs are not part of the actual cost of the asset since they are incurred regardless of whether the cinema is constructed. The court noted that no principle of accountancy supports the inclusion of these taxes as part of the building's cost. |
| Summary |
In the case of Kapur Sons & Co. v. Commissioner of Income Tax, the Delhi High Court addressed the issue of whether amounts paid for ground rent, corporation tax, and house tax could be included in the actual cost of a cinema building for depreciation purposes under section 43(1) of the Income-tax Act, 1961. The court found that these payments, while significant, did not constitute part of the building's cost as they were obligations incurred irrespective of the construction. The decision emphasized the need for a clear nexus between costs incurred and the actual cost of the asset to qualify for capitalisation. This case highlights important principles in taxation law and the treatment of expenses, providing clarity on what constitutes actual cost for depreciation claims. Keywords include 'Income-tax Act', 'depreciation allowance', 'actual cost', 'Kapur Sons & Co.', and 'Delhi High Court'. |
| Court |
Delhi High Court
|
| Entities Involved |
Not available
|
| Judges |
D.K. Kapur,
S. Ranganathan
|
| Lawyers |
Y.P. Mahana,
L.K. Paonak,
K.K. Wadera,
R.C. Pandey
|
| Petitioners |
Kapur Sons & Co.
|
| Respondents |
Commissioner of Income Tax
|
| Citations |
1986 SLD 1352,
(1986) 157 ITR 382
|
| Other Citations |
CIT v. Standard Vacuum Refining Co. of India Ltd. [1966] 61 ITR 799 (Cal.),
Challapalli Sugars Ltd. v. CIT [1975] 98 ITR 167 (SC)
|
| Laws Involved |
Income-tax Act, 1961
|
| Sections |
43(1)
|