Commissioner of Income Tax vs D.D. Industries Ltd.

The Income Tax Appellate Tribunal (hereinafter referred to as "the Tribunal"), has arrived at a finding of fact, in the facts situation appearing on record, that the money paid for annual maintenance contract (AMC) for ten years warranted, which was included in the invoice at the time of purchase of equipment should be included as sale price of the said equipment. In this regard, learned Counsel for the Revenue has referred to the judgment of the Supreme Court in the case of Guzdar Kajora Coal Mines Ltd., Calcutta Vs. The Commissioner of Income Tax, Calcutta, , wherein the following principle was laid down (headnote):

The original cost to the assessee of a particular asset is a question of fact which has to be determined on the evidence or material placed before or available to the Income Tax authorities. Any document or formal deed mentioning the consideration or the cost paid for the purchase of an asset by the assessee would be a piece of evidence and prima facie the statements or figures given therein would show how much the cost of the asset to the assessee is. But, if circumstances exist showing that a fictitious price has been put on the asset or there is fraud or collusion between the vendor and the assessee and there has been inflation or deflation of value for ulterior purposes it is open to the Income Tax authorities to refuse to accept the price mentioned or allocation given in the deed or alleged by the assessee and to ascertain what the actual cost was or to determine the allocation between depreciable and non-depreciable assets.

In its judgment, the Supreme Court has clarified that the original cost to the assessee of a particular asset is a question of fact. It has also laid down that normally the consideration or cost paid for purchase of an asset would be a piece of evidence and prima facie the statement or figures given therein would show how much cost of the asset to the assessee is. Going by this consideration, the cost paid by the assessee herein as effected in the invoice, could be treated as capital cost. The Assessing Officer, however, could tinker with the cost showed in the invoice only if fictitious price had been put in the invoice or there was fraud or collusion between the vendor and the assessee and there had been inflation or deflation of value for ulterior purposes. The Assessing Officer has not brought the case in any of these exceptions.

Therefore, it was a pure finding of fact arrived at by the Tribunal, no question of law arises. This appeal is accordingly dismissed.