TMI Blog2008 (7) TMI 509X X X X Extracts X X X X X X X X Extracts X X X X ..... - 144 of 2001 and others - - - Dated:- 21-7-2008 - K. A. Puj and R. H. SHUKLA JJ. . Tax Appeals Nos. 144 of 2001, 19, 238, 290, 291 of 2002, 169, 385, 386 of 2003 and 244 of 2006. R. K. Patel for the appellant. K. M. Parikh for the respondent JUDGMENT The judgment of the court was delivered by 1. K. A. Puj J.— Since a common issue is involved in all these tax appeals and since all these tax appeals are in the same assessee's case, namely, Elecon Engineering Co. Ltd. for the assessment years 1986-87 to 1994-95 they are being disposed of by this common judgment and order. 2. At the instance of the assessee, the following substantial questions of law were formulated for the assessment year 1986-87, which is the first assessment year in point of time, for the consideration and determination of this court: "(i) Whether on the facts and in the circumstances of the case, the Tribunal has substantially erred in law in ignoring the ratio of the binding decision of the Supreme Court in the case of Addl. CIT v. Akkamamba Textiles Ltd. [1997] 227 ITR 464 and CIT v. Sivakami Mills Ltd. [1997] 227 ITR 465? (ii) Whether on the facts and in the circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnection with purchase of plant and machinery and the same is in the nature of capital expenditure. 6. Being aggrieved by the said disallowance the appellant preferred appeals for the respective years before the learned Commissioner of Income-tax (Appeals). The learned Commissioner of Income-tax (Appeals) gave a factual finding that the amount is paid by way of premium to cover the e fluctuation risk and allowed the expenditure as revenue expenditure as claimed by the appellant. 7. Being aggrieved by the order of the learned Commissioner of Income-tax (Appeals), the Revenue preferred appeal before the Tribunal. The Tribunal has considered the submissions of the assessee and the Revenue and the provisions contained in section 36(1) (iii) read along with section 43A of the Income-tax Act, 1961 and concluded the issue against the assessee by reversing the decision of the Commissioner of Income-tax (Appeals) by sating that looking to the nature of the expenses and the provisions of section 43A, the Assessing Officer is legally and factually correct in capitalizing the roll over charges. 8. For all subsequent years the Tribunal has followed its own order passed for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of acquisition of machinery. He has, therefore, submitted that the premium paid on forward contracts is an allowable deduction and accordingly such premium amount is required to be allowed. 11. Mr. Patel has further submitted that section 43A was invoked for the first time before the Tribunal. Under sub-section (1) of section 43A, while determining the cost to the assessee of the machinery, except for ascertaining whether and to what extent the cost has been met directly or indirectly by any other person or authority, the Assessing Officer cannot go into the question as to how the assessee got the currency for paying the price of the machinery and at what rate he got it. Sub-section (1) of section 43A restricts the scope and effect of devaluation to determine the cost of acquisition of a capital asset, not being a capital asset referred to in section 50, for the purpose of section 48. Section 50 deals with a capital asset in respect of which a deduction on account of depreciation has been obtained by the assessee in any previous years in computing "capital gains" arising on the sale or transfer of a capital asset acquired from abroad, on deferred payment terms or against a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(iii) emphasises the user of the capital and not the user of the asset which comes into existence as a result of the borrowed capital. The Legislature has, therefore, made no distinction in section 36(1) (iii) between "capital borrowed for a revenue purpose" and "capital borrowed for a capital purpose". An assessee is entitled to claim interest paid on borrowed capital provided that the capital is used for business purpose irrespective of what may be the result of using the capital which the assessee has borrowed. "Actual cost" of an asset has no relevancy in relation to section 36(1)(iii). 15. Mr. Patel further relied on the decision of the apex court in the case of Deputy CIT v. Gujarat Alkalies and Chemicals Ltd. reported in [2008] 299 ITR 85, wherein the finance charges paid by the assessee to COFACE on the foreign currency were treated by the Revenue in the nature of interest and commitment charges and following its own decisions in Deputy CIT v. Core Health Care Ltd. [2008] 298 ITR 194 (SC) as well as Akkamamba Textiles Ltd. [1997] 227 ITR 464 and CIT v. Sivakami Mills Ltd. [1997] 227 ITR 465 (SC), the apex court decided the matter in favour of the assessee and against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of section 43A of the Act, the Assessing Officer is legally and factually correct in capitalizing the roll over charges. He has, therefore, submitted that the Tribunal has rightly decided the issue in favour of the Revenue and against the assessee and no interference is called for in the order of the Tribunal. He has further submitted that section 43A was not under consideration in any of the decision of the apex court cited and relied upon by the assessee. He has, therefore, submitted that all these appeals are required to be dismissed. 18. Having considered the rival submissions and the relevant statutory provisions contained in sections 36(1)(iii), 37(1) and 43A read with Explanation 3 thereto and the authorities cited before the court, we are of the view the roll over charges paid by the appellant-assessee to Citi Bank are nothing but interest or committal charges and as per the decision of the apex court in the case of Deputy CIT v. Core Health Care Ltd. [2008] 298 ITR 194 and Deputy CIT v. Gujarat Alkalies and Chemicals Ltd. [2008] 299 ITR 85 (SC) the same are allowable under section 36(1)(iii) of the Act. There is no dispute about the fact that the amount borrowed i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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