This appeal is filed by assessee in which relevant ground reads as follows: "The ld. CIT (A) has erred in law and on facts of case by confirming ITO's holding that penalty of Rs. 1,75,000 paid to custom authorities for import of machine cannot be added to cost of machinery and consequently no depreciation and investment allowance is allowable on amount." assessee, Limited Company, had imported machine known as 'Jung Fully Automatic Internal Grinding Machine Model CM 8'. import of said machine was not found to be in order by custom authorities inasmuch as it contravened certain provisions of Custom Act. custom authorities, therefore, issued show-cause notice asking assessee to explain why said machine should be confiscated under relevant provisions of Custom Act read with relevant provisions of Import & Export (Control) Act, 1947. assessee, however, was given option to pay fine of Rs. 3,50,000 in lieu of confiscation. This fine was reduced to Rs. 1,75,000 in appeal filed by assessee to Central Board of Excise and Customs. assessee claimed that it should be allowed depreciation and investment allowance on said amount which forms part of actual cost. Since impugned amount resulted in increase of actual cost of machine, assessee was entitled to said claim. ITO, however, rejected claim of assessee on ground that payment of penalty for infraction of law was not allowable as business expenditure and, therefore, same was not eligible to depreciation or investment allowance. Being aggrieved, assessee carried matter in appeal before CIT (A) who upheld view of ITO. Hence this appeal. Before us, ld. representative of assessee submitted that in view of decision of their Lordships of Supreme Court in case of CIT vs. Kores India Ltd. reported in (1983) 140 ITR (St.) 1 in which Special Leave Petition filed by department against judgment of their Lordships of Bombay High Court was rejected claim on assessee should be allowed. ld. department representative, on other hand, relied on orders of authorities below. We have considered rival submissions. It is not in dispute that assessee had paid impugned amount of fine as reduced by Central Board of Excise and Customs on appeal in lieu of confiscation of machinery i n question. point at issue is another said amount would result in increase of actual cost so as to be exigible to depreciation and investment allowance. In this connection we may refer to decision relied upon on behalf of assessee in Kores India Ltd. (supra). relevant extract in this regard is set out hereunder: "17th Nov., 1982: Their Lordships Fazal Ali and Venkataramaiah, JJ. dismissed Special Leave Petition by department against order of Bombay High Court dt. 12th Feb., 1978 in I.T.A. No. 189 of 1978 refusing to direct Tribunal to refer question whether, where assessee agreed to pay, in addition to price, sum imposed as penalty by customs authorities on importer for failure to have item covered by import licence, assessee was entitled to include this amount of penalty in actual cost of machinery for purposes of allowance of depreciation and development rebate CIT vs. Kores India Ltd. S.L.P. (Civil) No. 1938 of 1980." In light of above decision which we follow with respect, we find no reason to reject claim of assessee. We, therefore, hold that assessee should be allowed depreciation and investment allowance on impugned amount of fine as paid by assessee by treating same as part of actual cost. In result, appeal is allowed. *** M. K. SPINDLE MFGRS. (P) LTD. v. INCOME TAX OFFICER