TMI Blog1998 (1) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... hat a similar claim had been allowed for the previous assessment year 1978-79 by the order of the Income-tax Appellate Tribunal dated November 21, 1983. It is contended on behalf of the Revenue that, if the actual cost in the year of installation was not revised, the actual cost of the machinery could not be revised in the subsequent year and, therefore, the assessee would not be entitled to the allowance. The Tribunal found that under sub-section (3)(ii) of section 32A of the Act the investment allowance which could not be set off against the income of the year of installation could be carried forward and that was an enabling provision which allowed the claim in the subsequent year instead of driving the assessee to the rectification of the assessment of the earlier years for reworking of the investment allowance in the year of installation and again carrying it forward for the allowance in the subsequent assessment years. Accordingly, the Tribunal allowed the claim of the assessee. It is contended on behalf of the assessee that the assessee is entitled to the higher rate of depreciation at five per cent. on the value of the plant and machinery. It is contended that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence not eligible for deduction?" We have heard learned counsel on both the sides on the questions referred by the Tribunal. The contentions regarding question No. 1 under reference are as follows : The point involved in the question is whether the assessee is entitled to depreciation and extra shift allowance on the increase in the value of machinery and plant consequent on the fluctuations of foreign currency. There is no dispute that the assessee has purchased the machinery from a foreign country by taking loan from foreign country in dollars. The assessee entered into an agreement for payment of the purchase money in yearly instalments and accordingly the assessee is paying the amount. There are fluctuations in the value of the rupee and the value of the dollar increased which made the assessee pay more than the amount paid during the previous years. The case of the assessee is that the amount paid in excess must be taken as investment on the machinery and, therefore, depreciation has to be given to such capital value of the machinery. Whereas the Revenue contended that once the assessee purchased the machinery, the value payable or agreed to be payable on the date of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as so increased; and (ii) in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 1989, the written down value of that block of assets in the immediately preceding previous year as reduced by the depreciation actually allowed in respect of that block of assets in relation to the said preceding previous year and as further adjusted by the increase or the reduction referred to in item (i). Explanation 1.---When in a case of succession in business or profession, an assessment is made on the successor under sub-section (2) of section 170, the written down value of any asset or any block of assets shall be the amount which would have been taken as its written down value if the assessment had been made directly on the person succeeded to. Explanation 2.---Where in any previous year, any block of assets is transferred,--- (a) by a holding company, to its subsidiary company, or by a subsidiary company to its holding company and the conditions of clause (iv) or, as the case may be, of clause (v) of section 47 are satisfied; or (b) by the amalgamating company to the amalgamated company in a scheme, of amalgamation, and the amalg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court held thus : "We have carefully examined the detailed analysis made by the Tribunal on this claim of the assessee. We are of the view that every one of the reasons on which the Tribunal accepted the claim of the assessee that forms part of this question is sound and the same squarely falls within the purview of section 43A of the Act. We are also of the view that this claim of the assessee also attracts the Board's Circular No. F 1 (408/67-TPL dated October 19, 1967) (reproduced at pages 1610 to 1612 of Chaturvedi and Pithisaria's Income Tax Law, 3rd edition) which has properly interpreted the scope and ambit of section 43A of the Act. From this, it follows that our answer to question No. 1 must be in the affirmative." In view of the above facts and circumstances of the case, we answer question No. 1 in favour of the assessee and against the Revenue. The second question that arises for our consideration is whether allowing the higher rate of depreciation at five per cent. on the value of canteen buildings is correct or not. This question has already been decided by this court in CIT v. Motor Industries Co. Ltd. [1986] 158 ITR 734. The Division Bench of this court held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om earlier year under the provisions of the Payment of Bonus Act could not be treated as an outgoing and hence the assessee is not eligible for deduction. Accordingly, we answer question No. 3 in favour of the assessee and against the Revenue and question No. 5 against the assessee and in favour of the Revenue. The remaining question that arises for our consideration is question No. 4 and it is whether the assessee is entitled to weighted deduction under section 35B of the Act on the interest on packing credit and on export guarantee commission. A similar question was considered by this court in CIT v. J. B. Advani and Co. (Mysore) (Pvt.) Ltd. [1987] 163 ITR 638 wherein the Division Bench of the court held that the assessee is entitled only for the amount paid to the Export Credit Guarantee Corporation, as the same is permissible under section 35B(1) of the Act. Whereas the weighted deduction on the interest on packing credit is not decided in the case earlier. Therefore, we have to hold on the question that the assessee is entitled to the weighted deduction for the sum paid to the Export Credit Guarantee Corporation. He is not entitled to the weighted deduction on the credit amo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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