Commissioner Of Income Tax, Kolkata vs M/S. Hoogly Mills Co. Ltd

The Supreme Court held that the amount of Rs.3.5 crores taken over by M/s. Hooghly Mills Co. Ltd. as gratuity liability is capital expenditure under Section 32 of the Income Tax Act, as it is part of the consideration for acquiring an industrial undertaking. The Court distinguished between revenue and capital expenditure, stating that while gratuity liability is revenue expenditure for the vendor, it becomes capital expenditure for the vendee when included in the purchase agreement. The High Court's decision to allow depreciation on this amount was upheld.