Meaning of “Cost”

Case Name : Cit vs. Standard vacuum refining co. Of india ltd. 

Citation : [1966] 61 Itr 799 (cal.)

Court : Kolkata high court

Section : 43(1)

Meaning : The term ‘cost’ has not been defined in the income-tax act. There is nothing in that act which says that interest can never form part of the cost of construction. That being the position, reference may be made to commercial practice to ascertain the meaning of cost as contemplated by section 10(5)(a) of the 1922 act, and the principles of accountancy are in accordance with ordinary commercial principles. If an accountant in consonance with the principles of accountancy regards interest as an element of cost and such interest is paid on share capital raised on debentures issued for obtaining a capital asset, he does so according to commercial principles.