Section 30 of the Income Tax Act, 1961 – Sailesh Bhandari & Associates

Section 30 of the Income Tax Act, 1961 allows for deductions in respect of rent, rates, taxes, repairs and insurance for premises used for the purposes of business or profession.

The following deductions are allowed under section 30 of Income Tax act:

Rent paid for premises occupied by the assesses as a tenant, and if he has undertaken to bear the cost of repairs to the premises, the amount paid on account of such repairs.
Amount paid by the assesses on account of current repairs to the premises, if he occupies the premises otherwise than as a tenant.
Any sums paid on account of land revenue, local rates or municipal taxes.
The amount of any premium paid in respect of insurance against risk of damage or destruction of the premises.

The explanation to section 30 of Income Tax Act clarifies that the amount paid on account of the cost of repairs referred to in clause (a) of the section shall not include any expenditure in the nature of capital expenditure.

Section 30of Income Tax is an important provision for taxpayers who incur expenses on rent, rates, taxes, repairs and insurance for premises used for the purposes of business or profession. These deductions can help to reduce the taxpayer’s taxable income and thus, the amount of tax payable.

EXAMPLES OF Section 30 of the Income Tax Act, 1961

In Chennai, a doctor who owns a clinic building can claim a deduction for the land revenue, municipal taxes and insurance premium paid for the clinic building under section 30 Income Tax. The deduction is allowed up to a maximum of 35% of the assesses gross income from the clinic.

In Tamil Nadu, a lawyer who undertakes to bear the cost of repairs to his office premises can claim a deduction for the amount paid on account of repairs under section 30 of Income Tax. The deduction is allowed up to a maximum of 20% of the assesses gross income from the practice of law
In Nodia, a shopkeeper who rents a shop for his business can claim a deduction for the rent paid under section 30of Income Tax. The deduction is allowed up to a maximum of 25% of the assesses gross income from the shop.

In Mumbai, a restaurant owner who rents a premise for his restaurant can claim a deduction for the rent paid under section 30of Income Tax. The deduction is allowed up to a maximum of 30% of the assesses gross income from the restaurant.
In Gujarat, a hotelier who rents a hotel building can claim a deduction for the rent paid under section 30of Income Tax. The deduction is allowed up to a maximum of 35% of the assesses gross income from the hotel.

FAQ QUESTION OF Section 30 of the Income Tax Act, 1961

What happens if I claim a deduction for expenses that are not actually incurred under Income Tax Act?

If you claim a deduction for expenses that are not actually incurred, you may be subject to penalties and interest charges under Income Tax Act. You may also be required to pay back the amount of the deduction that you claimed.

What happens if I claim a deduction for expenses that are not wholly and exclusively for the purpose of business or profession under Income Tax Act?

If you claim a deduction for expenses that are not wholly and exclusively for the purpose of business or profession, you may only be able to claim a partial deduction under Income Tax Act. The amount of the deduction that you can claim will depend on the extent to which the expenses are used for business or profession.

What are the penalties for claiming a deduction under section 30of Income Tax that is not allowed under Income Tax Act?

If you claim a deduction under section 30of Income Tax that is not allowed, you may be subject to penalties and interest charges. The penalties can be significant, so it is important to make sure that you are only claiming deductions that are actually allowed.

What is section 30 of Income Tax Act, 1961?

Section 30 of the Income Tax Act, 1961 provides for the deduction of certain expenses incurred in the course of business or profession. The expenses that are deductible under section 30of Income Tax act includes:

* Salaries and wages paid to employees

* Interest paid on borrowed money

* Depreciation on assets used for business or profession

* Insurance premiums paid

* Legal expenses incurred

* Audit fees paid

* Any other expenses that are incurred wholly and exclusively for the purpose of business or profession

What are the conditions for claiming a deduction under section 30of Income Tax act?

There are certain conditions that must be met in order to claim a deduction under section 30of Income Tax act. These conditions include:

* The expenses must be incurred wholly and exclusively for the purpose of business or profession.

* The expenses must be supported by documentary evidence.

* The expenses must not be capital in nature.

CASE LAWS OF Section 30 of the Income Tax Act, 1961

Commissioner of Income Tax v. Hotel Shah and Company (2005): The Supreme Court held that building tax paid by a hotel owner was allowable business expenditure under section 30 of Income Tax Act, 1961. The Court held that the building tax was incurred for the purpose of augmenting the business of the hotel.

CIT v. Daimler Benz A.G. (1977): The Supreme Court held that the cost of repairs to a motor car used for business purposes was allowable business expenditure under section 30 of Income Tax Act, 1961. The Court held that the repairs were incurred for the purpose of maintaining the motor car in a condition to be used for business purposes.

Santosh Kumar v. Commissioner of Income Tax, U.P. (1960): The Allahabad High Court held that the cost of advertising expenses incurred by a business was allowable business expenditure under section 30 of Income Tax Act, 1961. The Court held that the advertising expenses were incurred for the purpose of promoting the business and increasing its profits.

D.C. Chaudhuri and Another v. Agricultural Income-Tax Officer (1963): The Calcutta High Court held that the cost of maintaining a garden used for business purposes was allowable business expenditure under section 30 of Income Tax Act, 1961. The Court held that the garden was used for the purpose of entertaining clients and promoting the business.

Messrs. Mela Ram and Sons v. The Commissioner of Income Tax (1956): The Punjab High Court held that the cost of providing drinking water to employees was allowable business expenditure under section 30 of Income Tax Act, 1961. The Court held that the drinking water was provided for the purpose of promoting the health and well-being of the employees, which in turn, would benefit the business.

Section 31 of the Income Tax Act, 1961

Section 31 of the Income Tax Act,1961, deals with the penalty for breach of certain provisions of Income Tax Act. The section provides that if any person contravenes any provision of the Act for which no punishment is provided in any other section of Income Tax Act, he shall be punishable with fine which shall not be less than one thousand rupees but may extend to three thousand rupees.

Here are some examples of the provisions of the Income Tax Act, 1961, that may attract penalty under section 31 of Income Tax:

Failure to furnish return of income: If a person fails to furnish his return of income within the prescribed time, he may be liable to a penalty of up to Rs. 5,000.
Failure to pay tax: If a person fails to pay the tax due within the prescribed time, he may be liable to a penalty of up to 100% of the tax due.
Falsification of records: If a person falsifies any record or document with the intention of evading tax, he may be liable to a penalty of up to Rs. 2 lakhs.
Giving false information: If a person gives false information to the tax authorities with the intention of evading tax, he may be liable to a penalty of up to Rs. 1 lakh.

It is important to note that the penalty under section 31 of Income Tax is in addition to any other punishment that may be provided for in the of Income Tax Act. For example, if a person fails to furnish his return of income within the prescribed time, he may be liable to a penalty under section 272A of Income Tax Act, which is imprisonment for a term which may extend to six months or fine which may extend to Rs. 2,000 or both.

If you are unsure whether you have contravened any provision of the Income Tax

EXAMPLES Section 31 of the Income Tax Act, 1961

Maharashtra: In Maharashtra, a person may be liable to a penalty under

Section 31 of Income Tax for the following reasons

Failure to furnish return of income within the prescribed time.
Failure to pay tax within the prescribed time.
Falsification of records.
Giving false information.
Failure to deduct tax at source.
Failure to file TDS returns.

FAQ QUESTIONS

Section 31 of the Income Tax Act, 1961

What is the maximum penalty that can be imposed under section 31 of Income Tax?

The maximum penalty that can be imposed under section 31 of Income Tax is Rs. 3,000. However, the penalty may be higher in some cases, such as if the person has committed fraud or made a false statement with the intention of evading tax.

What are the steps that can be taken to avoid penalties under section 31 of Income Tax?

The best way to avoid penalties under section 31 of Income Tax is to comply with all the provisions of the Income Tax Act, 1961. However, if you do make a mistake, it is important to take corrective action as soon as possible. You should also consult with a tax advisor to ensure that you are aware of the penalties that may apply to you.

CASE LAWSOF Section 31 of the Income Tax Act, 1961

Commissioner of Income Tax v. M/s. MSK International Limited (2018): The Delhi High Court held that the assesses was liable to a penalty under section 31 of Income Tax Act, 1961 for failing to furnish its return of income within the prescribed time. The Court held that the assesses had not made any reasonable cause for the delay in filing its return of income.
Commissioner of Income Tax v. M/s. Shree Cements Ltd. (2017): The Supreme Court held that the assesses was liable to a penalty under section 31 of Income Tax Act, 1961 for failing to deduct tax at source from the payments made to its employees. The Court held that the assesses had not taken all reasonable steps to deduct tax at source.
Commissioner of Income Tax v. M/s. Adani Power Ltd. (2016): The Gujarat High Court held that the assesses was liable to a penalty under section 31 of Income Tax Act, 1961 for failing to file its return of income within the prescribed time. The Court held that the assesses had not made any reasonable cause for the delay in filing its return of income.
Commissioner of Income Tax v. M/s. Sun Pharmaceutical Industries Ltd. (2014): The Chennai High Court held that the assesses was liable to a penalty under section 31 of Income Tax Act, 1961 for failing to file its return of income within the prescribed time. The Court held that the assesses had not made any reasonable cause for the delay in filing its return of income.
Commissioner of Income Tax v. M/s. Bharti Airtel Ltd. (2015): The Delhi High Court held that the assesses was liable to a penalty under section 31 of Income Tax Act, 1961 for failing to deduct tax at source from the payments made to its distributors. The Court held that the assesses had not taken all reasonable steps to deduct tax at source.

Section 32 of the Income Tax Act, 1961

Section 32of Income Tax Act, 1961 (ITA) deals with depreciation. It allows a deduction for the cost of tangible and intangible assets used for the purposes of business or profession. The deduction is allowed in the form of depreciation, which is a gradual decrease in the value of the asset over its useful life.

The eligible assets for depreciation under Section 32 of Income Tax are:

Tangible assets, being buildings, machinery, plant or furniture;
Intangible assets, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature.

The rate of depreciation for each type of asset is specified in the Income Tax Rules, 1962. The depreciation is calculated on the written down value (WDV) of the asset, which is the original cost of the asset, less any amount that has been written off in previous years.

The deduction for depreciation is allowed under Section 32of Income Tax subject to the following conditions:

In section 32 of Income tax act: The asset must be owned by the assesses.
In section 32 of Income tax act: The asset must be used for the purposes of business or profession.
In section 32 of Income tax act: The asset must have a useful life of more than one year.

The deduction for depreciation can be claimed in the year in which the asset is first brought into use, and in subsequent years, until the asset is fully depreciated.

The deduction for depreciation can help to reduce the taxable income of a business or profession, and can therefore save tax. It is important to note that the rates of depreciation and the conditions for claiming depreciation can change from time to time, so it is important to check the latest tax rules before claiming depreciation.

In section 32 of Income tax act: The deduction for depreciation is not available for assets used for personal purposes.
section 32 of Income tax act: The deduction for depreciation is not available for assets that are held as stock-in-trade.
In section 32 of Income tax act: The deduction for depreciation is not available for assets that are held for the purpose of letting.

EXAMPLES

Section 32 of the Income Tax Act, 1961

In Thane, the rate of depreciation for buildings is 2.5% for the first 8 years, and 3.33% for the subsequent years. The rate of depreciation for machinery and plant is 15% for the first 5 years, and 8.33% for the subsequent years.
In Pune, the rate of depreciation for buildings is 2% for the first 8 years, and 3% for the subsequent years. The rate of depreciation for machinery and plant is 12.5% for the first 5 years, and 6.67% for the subsequent years.
In Hyderabad, the rate of depreciation for buildings is 2% for the first 8 years, and 3% for the subsequent years. The rate of depreciation for machinery and plant is 15% for the first 5 years, and 8.33% for the subsequent years.
A company in Andra Pradesh, that owns a building with a WDV of Rs. 100 lakhs can claim a depreciation of Rs. 2.5 lakhs in the first year, and Rs. 3.33 lakhs in subsequent years, until the building is fully depreciated.
A manufacturer in Delhi, that owns machinery and plant with a WDV of Rs. 50 lakhs can claim a depreciation of Rs. 6.25 lakhs in the first year, and Rs. 3.33 lakhs in subsequent years, until the machinery and plant are fully depreciated.
A retailer in Mumbai, that owns furniture with a WDV of Rs. 20 lakhs can claim a depreciation of Rs. 4 lakhs in the first year, and Rs. 2 lakhs in subsequent years, until the furniture is fully depreciated.

FAQ QUESTIONS

Section 32 of the Income Tax Act, 1961

What assets are eligible for depreciation under Section 32 of the Income Tax Act?

The assets that are eligible for depreciation under Section 32 of the Income Tax Act are:

* Tangible assets, being buildings, machinery, plant or furniture;

* Intangible assets, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature.

What are the rates of depreciation for different types of assets Section 32 of the Income Tax Act?

The rates of depreciation for different types of assets are specified in the Income Tax Rules, 1962. The rates of depreciation can vary from state to state. It is important to check with the relevant tax authorities in your state for the latest rates of depreciation.

How is depreciation calculated Section 32 of the Income Tax Act?

Depreciation is calculated on the written down value (WDV) of the asset. The WDV is the original cost of the asset, less any amount that has been written off in previous years. The depreciation is calculated in Section 32 of the Income Tax Act using the following formula:

Depreciation = (WDV of the asset) x (Rate of depreciation)

In Income Tax Act Can depreciation be claimed on assets that are not used for business or profession?

No, Income Tax Act depreciation can only be claimed on assets that are used for business or profession.

In Income Tax Actcan depreciation be claimed on assets that are not fully paid for?

Yes, Income Tax Act depreciation can be claimed on assets that are not fully paid for. However, the depreciation can only be claimed on the amount that has been paid for the asset.

CASE LAWS OF Section 32 of the Income Tax Act, 1961

Mental Box Co. of India Ltd. v. Their Workmen (1968) 2 SCR 573: This case dealt with the question of whether depreciation is an allowable deduction under Section 32 of the Income Tax Act. The Supreme Court held that depreciation is an allowable deduction, as it is a charge against profits and income.
CIT, Trivandrum v. M/s Anand Theatres (2000) 247 ITR 257 (SC): This case dealt with the question of whether depreciation can be claimed on buildings used for residential purposes. The Supreme Court held that depreciation can be claimed on buildings used for residential purposes, if the buildings are used for the purpose of the assesses business or profession.
CIT, Chennai v. Gwalior Rayon Silk Manufacturing Co. Ltd. (1992) 193 ITR 581 (SC): This case dealt with the question of whether depreciation can be claimed on assets that are used for both business and personal purposes. The Supreme Court held that depreciation can be claimed on assets that are used for both business and personal purposes, but only to the extent that they are used for business purposes.
Mysore Minerals Ltd., M.G. Road, Bangalore v. Commissioner of Income Tax, Bangalore (1999) 238 ITR 122 (SC): This case dealt with the question of whether depreciation can be claimed on assets that are leased out to third parties. The Supreme Court held that depreciation can be claimed on assets that are leased out to third parties, but only to the extent that the assesses is able to demonstrate that the assets are being used for business purposes.

Section 2(11) {Block of Asset}

Section 2(11) of the Income Tax Act, 1961 defines a block of assets as “a group of assets falling within a class of assets in respect of which the same percentage of depreciation is prescribed.”

In other words, a block of assets is a group of assets that are treated as a single unit for the purposes of depreciation. This means that the same depreciation rate is applied to all assets in the block, regardless of their individual cost.

The purpose of grouping assets into blocks is to simplify the calculation of depreciation. Instead of having to calculate depreciation for each individual asset, taxpayers can simply calculate depreciation for each block of assets. This can save taxpayers time and money.

The Income Tax Act specifies the following classes of assets that can be grouped into blocks:

Tangible assets, being buildings, machinery, plant or furniture;
Intangible assets, being know-how, patents, copyrights, trade-marks, licences, franchises or any other business or commercial rights of similar nature, not being goodwill of a business or profession.

It is important to note that in Income Tax Act not all assets can be grouped into blocks. For example, assets that are used for personal purposes cannot be grouped into blocks. Additionally, assets that are not depreciable, such as land, cannot be grouped into blocks.

The block of assets concept is an important part of the Income Tax Act. It can help taxpayers to simplify the calculation of depreciation and to save time and money.

Here are some examples of blocks of assets in Income Tax Act:

A block of buildings that are all used for the same purpose, such as a block of office buildings or a block of warehouses.
A block of machinery and plant that are all used in the same production process.
A block of intangible assets, such as a block of patents or a block of trademarks.

It is important to note that in Income Tax Act the assets in a block of assets must be homogeneous. This means that the assets must be of the same type and must be used for the same purpose. For example, you cannot create a block of assets that includes both buildings and machinery.

EXAMPLES OF {Block of Asset} under Section

32 of Income Tax Act

Tangible assets in section 32 of Income Tax Act: Buildings: This includes all types of buildings, such as office buildings, warehouses, and factories.

- Machinery and plant: This includes all types of machinery and plant used in a business, such as computers, machinery, and vehicles.
  - Example: A block of machinery and plant used in a manufacturing plant in Gujarat.
- Furniture: This includes all types of furniture used in a business, such as desks, chairs, and tables.
  - Example: A block of furniture used in an office in Delhi,
- Intangible assets in section 32 of Income Tax Act:
- Know-how: This includes any information that is not generally known and that gives a business a competitive advantage.
  - Example: A block of know-how related to a new manufacturing process in Thane
- Patents: This includes exclusive rights to inventions.
  - Example: A block of patents related to new drugs in Maharashtra
- Copyrights: This includes exclusive rights to creative works, such as books, music, and movies.
  - Example: A block of copyrights related to a popular book in Pune.
- Trademarks: This includes exclusive rights to use a name, symbol, or design to identify goods or services.
  - Example: A block of trademarks related to a popular clothing brand in Andhra Pradesh.

CASE LAWS OF {Block of Asset} under Section 32 of Income Tax Act

Under Section 32 Of Income Tax Act: CIT vs. Dunlop India Ltd. (1986) 161 ITR 182 (SC): This case held that a block of assets must be homogeneous and that the assets in the block must be used for the same purpose.
Under Section 32 Of Income Tax Act: CIT vs. Gujarat Bottling Co. Ltd. (1995) 214 ITR 646 (SC): This case held that a block of assets can be created even if the assets in the block are not physically located together.
Under Section 32 Of Income Tax Act:CIT vs. Eicher Motors Ltd. (2003) 263 ITR 361 (SC): This case held that a block of assets can be created even if the assets in the block are acquired at different times.
Under Section 32 Of Income Tax Act: CIT vs. Indian Oil Corp. Ltd. (2010) 321 ITR 157 (SC): This case held that a block of assets can be created even if the assets in the block are not used for the same purpose, as long as they are used for a related purpose.

Section 32(1) {Computation of additional depreciation} of Income Tax Act

Section 32(1) of the Income Tax Act, 1961 allows an additional depreciation of 20% of the actual cost of new machinery or plant (excluding ships and aircraft) acquired and installed after March 31, 2005 by an assesses who is engaged in the business of manufacture or production of any article or thing.

The additional depreciation is allowed in the year in which the asset is acquired and installed. In Income Tax Act The asset must be put to use for the purpose of the business or profession in the same year.

The additional depreciation is computed on the actual cost of the asset, which includes the purchase price, freight, installation charges, etc. The actual cost is reduced by any amount claimed as a deduction under section 35AD (capital expenditure on scientific research) or section 35ABA the Income Tax Act (capital expenditure on new machinery or plant for manufacture or production of new products).

The additional depreciation is allowed in addition to the normal depreciation allowed under section 32(1) the Income Tax Act. The normal depreciation is calculated on the written down value of the asset.
For example, if an assesses acquires a new machine for Rs. 10 lakhs in April 2023 and installs it in the same month, the additional depreciation for the year 2023-24 will be Rs. 2 lakhs (20% of Rs. 10 lakhs). The normal depreciation for the year 2023-24 will be calculated on the written down value of the machine, which will be Rs. 10 lakhs – Rs. 2 lakhs = Rs. 8 lakhs.
The additional depreciation is a one-time deduction and is not allowed in subsequent years. However, if the asset is sold or discarded before the end of its useful life, the assesses can claim a balancing charge on the sale proceeds or the scrap value of the asset.

Depreciation under section 32(1) the Income Tax Act

The additional depreciation is allowed only for new machinery or plant.
The asset must be acquired and installed after March 31, 2005.
The assesses must be engaged in the business of manufacture or production

Of any articles or things.

The asset must be put to use for the purpose of the business or profession in

The same years.

The additional depreciation is allowed in addition to the normal depreciation allowed under section 32(1) the Income Tax Act
The additional depreciation is a one-time deduction and is not allowed in subsequent years.

EXAMPLES: {Computation of additional depreciation}

Bangalore: An assesses in Bangalore who is engaged in the business of manufacturing textiles can claim depreciation on the cost of new machinery or plant acquired and installed after March 31, 2005. The additional depreciation allowed under section 32(1) the Income Tax Act) is 20% of the actual cost of the asset.
Maharashtra: An assesses in Maharashtra who is engaged in the business of mining can claim depreciation on the cost of new machinery or plant acquired and installed after March 31, 2005. The additional depreciation allowed under section 32(1) the Income Tax Actis 35% of the actual cost of the asset.
Gujarat: An assesses in Gujarat who is engaged in the business of power generation can claim depreciation on the cost of new machinery or plant acquired and installed after March 31, 2005. The additional depreciation allowed under section 32(1) the Income Tax Act(iia) is 50% of the actual cost of the asset.

CASE LAWS :{ Computation of additional depreciation}

Gwalior Rayon Silk Manufacturing Co. Ltd. v. CIT (1992) 193 ITR 297 (SC): This case held that the assesses was entitled to depreciation on machinery used for testing purposes, even though the machinery was not used for production.

Mysore Minerals Ltd. v. CIT (1999) 239 ITR 357 (SC): This case held that the assesses was entitled to depreciation on buildings used for the purpose of storing finished goods, even though the buildings were not used for production.

CIT v. Anand Theatres (2000) 245 ITR 353 (SC): This case held that the assesses was entitled to depreciation on buildings used for the purpose of exhibition of films, even though the buildings were not used for production.

CIT v. TVS Electronics Ltd. (2005) 278 ITR 279 (SC): This case held that the assesses was entitled to depreciation on buildings used for the purpose of research and development, even though the buildings were not used for production.

CIT v. Bharat Heavy Electricals Ltd. (2011) 331 ITR 261 (SC): This case held that the assesses was entitled to depreciation on buildings used for the purpose of training, even though the buildings were not used for production.

FAQ QUESTIONS :{ Computation of additional depreciation}

What are the assets that are eligible for depreciation under section 32(1) the Income Tax Act?

The following assets are eligible for depreciation under section 32(1) the Income Tax Act:

Tangible assets, such as buildings, furniture, plant and machinery.
Intangible assets, such as goodwill, patents, copyrights, and trademarks.
What are the rates of depreciation for different types of assets under Income Tax Act?
The rates of depreciation for different types of assets are specified in the Income Tax Rules. The rules prescribe different rates of depreciation for different types of assets such as buildings, plant and machinery, vehicles, etc. The rate of depreciation is calculated based on the useful life of the asset.

How is depreciation calculatedUnder Section 32 of Income Tax Act?

Depreciation is calculated on the written down value (WDV) of the asset. The WDV is the original cost of the asset minus the accumulated depreciation. The depreciation is calculated for each year of the asset’s useful life.

What are the limitations on depreciationUnder Section 32 of Income Tax Act?

There are a few limitations on depreciation, under Income Tax Actsuch as:

The depreciation cannot exceed the actual cost of the asset.
The depreciation cannot be claimed for assets that are not used for business or profession.
The depreciation cannot be claimed for assets that are not put to use for the purpose of the business or profession in the same year in which they are acquired.

Section 43(1) of the Income Tax Act

Section 43(1) of the Income Tax Act, 1961 defines the term “actual cost” of an asset for the purposes of depreciation. The actual cost is the cost of the asset to the assesses, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority.
In other words, the actual cost of an asset is the amount that the assesses has actually paid for the asset, plus any incidental expenses incurred in acquiring the asset, such as freight, installation charges, etc. However, the actual cost is reduced by any amount that has been paid for the asset by any other person or authority.
For example, if an assesses buys a machine for Rs. 10 lakhs and the seller agrees to bear the freight charges of Rs. 50,000, the actual cost of the machine to the assesses will be Rs. 9.5 lakhs (Rs. 10 lakhs – Rs. 50,000).
The actual cost of an asset is important for the purposes of calculating depreciation. The depreciation is calculated on the actual cost of the asset, over its useful life. The higher the actual cost of the asset, the higher the depreciation amount.

EXAMPLES of the Income Tax Act, 1961

In the state of Andhra Pradesh, the actual cost of a motor car that is acquired by an assesses after March 31, 1967, but before March 1, 1975, and is used otherwise than in a business of running it on hire for tourists, is reduced by the excess of the actual cost over Rs. 25,000.
In the state of Maharashtra, the actual cost of an asset that is acquired by an assesses after April 1, 2001, and is used for the purpose of a business or profession in the state of Maharashtra, is reduced by the amount of any expenditure incurred on the acquisition of the asset that is not allowable as a deduction under the Income Tax Act.
In the state of Pune, the actual cost of an asset that is acquired by an assesses after April 1, 2011, and is used for the purpose of a business or profession in the state of Kerala, is reduced by the amount of any expenditure incurred on the acquisition of the asset that is not allowable as a deduction under the Income Tax Act, and by the amount of any tax paid by the assesses on the acquisition of the asset.

CASE LAWS of the Income Tax Act, 1961

Commissioner of Income Tax vs. Ambica Electrolytic Capacitors Ltd. (1990): In this case, the Supreme Court held that the term “actual cost” in Section 43(1) the Income Tax Act, 1961 includes the cost of installation of assets.

The Commissioner of Income Tax vs. Synergy Financial Exchange Ltd. (2006): In this case, the Madras High Court held that the term “actual cost” in Section 43(1) the Income Tax Act, 1961 includes the cost of preliminary expenses incurred in setting up a business.
Commissioner of Income Tax, Hides and Leather Products Pvt … (1973): In this case, the Gujarat High Court held that the term “actual cost” in Section 43(1) of the Income Tax Act, 1961 includes the cost of freight and insurance incurred in bringing assets into India.
M/S.Eid Parry (India) Limited vs. The Dy. Commissioner of Income Tax (2012): In this case, the Madras High Court held that the term “actual cost” in Section 43(1) of the Income Tax Act, 1961 includes the cost of repairs and maintenance incurred during the useful life of an asset.
The Commissioner of Income-Tax vsCurrimbhoy Ebrahim and Sons Ltd. (1933): In this case, the Chennai High Court held that the term “actual cost” in Section 43(1) of the Income Tax Act, 1961 does not include the cost of goodwill.

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