14/01/2019
MEANING OF "ACTUAL COST”[SEC. 43(1)] :- It means the actual cost to the assessee as reduced by that proportion of the cost thereof, if any, as has been met, directly or indirectly, by any other person or authority. Interest paid or payable on capital borrowed for the acquisition and installation of plant and machinery is treated as a part of actual cost and, consequently, the assessee is entitled to claim depreciation on such interest also. However, amount payable as interest in connection with acquisition of asset and relatable to a period after the asset is first put to use does not form part of actual cost. Likewise, commission paid to the banker for giving guarantee to the supplier of the asset is deemed as part of actual cost.
.) In order to discourage cash transactions even for capital expenditure, section 43(1) has been amended with effect from the assessment year 2018-19. The amended version provides that where an assessee incurs any expenditure for acquisition of any asset in respect of which a payment (or aggregate of payments made to a person in a day), otherwise than by an account payee cheque/ draft or use of electronic clearing system through abank account, exceeds RS. 10,000, such payment shall be ignored for the purposes of determination of actual cost of such asset. Consequently, normal depreciation/ additional depreciation under section 32 and investment allowance under section 32AD will not be available pertaining to a payment (exceeding Rs. 10,000) which is made otherwise than by an account payee cheque/ draft or use of electronic clearing system through a bank account.
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