COMMISSIONER OF INCOME TAX, KOLKATA vs M/S. HOOGHLY MILLS CO. LTD.

The Supreme Court held that the liability for gratuity taken over by the purchaser under the agreement dated 24.3.1988 constitutes capital expenditure, thus entitling the respondent to depreciation under Section 32 of the Income Tax Act. The Court distinguished between the vendor's revenue expenditure and the vendee's capital expenditure, affirming the decisions of the CIT (Appeal) and the tribunal. The appeal was dismissed, upholding the High Court's judgment that recognized the gratuity liability as part of the capital asset acquired.