TMI Blog2009 (1) TMI 427X X X X Extracts X X X X X X X X Extracts X X X X ..... -2009 - PINAKI CHANDRA GHOSE and SANKAR PRASAD MITRA JJ. Khaitan for the appellant. JUDGMENT 1. PINAKI CHANDRA GHOSE J. —This appeal is admitted by the court on the following substantial question of law: "Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that the appellant was not entitled to depreciation of Rs. 43,71,472 and the investment allowance of Rs. 27,01,145 on the increased cost of the plant and machinery resulting from increase in the liability to repay the foreign currency loans increased for purchase of such plant and machinery? 2. In this matter the assessment year involved is 1988-89. The learned Tribunal held that under section 43A of the said Act the claim of investment allowance is not allowable. Mr. Khaitan appearing in support of thisappeal drew our attention to section 43A which is quoted hereunder: "43A.(1) Notwithstanding anything contained in any other provisions of this Act, where an assessee has acquired any asset from a country outside India for the purposes of his business or profession and, in consequence of a change in the rate of exchange at any time after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision CIT v. Century Enka Ltd. [1992] 196 ITR 447 the court held that (pages 449 and 450): "In devaluation, there is a reduction in the value of a currency or of a standard monetary unit whereas in the case of fluctuation, there is no such reduction in the value of a currency or of a standard monetary unit; there is only fluctuation in the rate of exchange in day-to-day transactions. The day-to-day fluctuation in the rate of foreign exchange will not have any bearing on the liability as such. The crucial day is the date of repayment of the loan obtained for the purpose of acquisition of any capital asset. If a capital asset has been acquired by obtaining a loan or by deferred payment of the purchase price, and if, on the date of repayment of the loan of payment of any instalment of purchase price, any additional liability is imposed because of fluctuation in the rate of exchange, the assessee will be entitled to capitalise such liability. It is common knowledge that the rate of exchange fluctuates every day depending on the conditions prevailing in the International Monetary Market but such fluctuation in conversion cannot be taken into account unless, at the time of actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tual cost of the asset as defined in clause (1) of section 43; or (ii) the amount of expenditure of a capital nature referred to in clause (iv) of sub-section (1) of section 35 ; or (iii) the amount of expenditure of a capital nature referred to in section 35A ; or (iv) the amount of expenditure of a capital nature referred to in clause (ix) of sub-section (1) of section 36 ; or (v) the cost of acquisition of a capital asset (nor being a capital asset referred to in section 50) for the purposes of section 48, and the amount arrived at after such addition or deduction shall be taken to be the actual cost of the asset or the amount of expenditure of a capital nature or, as the case may be, the cost of acquisition of the capital asset as aforesaid:" 6. In our considered opinion the same has been amended in the light of the situation as felt by the Division Bench of this High Court in Century Enka Ltd. [1992] 196 ITR 447. Mr. Khaitan further drew our attention to the decision of the hon'ble Supreme Court reported in CIT v. Arvind Mills Ltd. [1992] 193 ITR 255 where the court held that section 43A in fact introduced to provide for the treatment of the situation creat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations in the exchange rate should not be taken into account. It may be that the Legislature intended to give a different treatment to development rebate from depreciation and other allowances because the allowance of development rebate can result in an assessee claiming allowance exceeding the original cost. It may be that the Legislature thought that, though development rebate was intended to promote development of industries, this could not be allowed at the cost of the foreign exchange resources of the country which are also depleted when there is an increase in liability due to devaluation of the currency. It is unnecessary to attribute any particular reason for the provision when the language of the section is otherwise plain and unambiguous. We do not think that in the face of the language of sub-section (2), it would be right to permit the assessee to claim development rebate on the increased cost." 8. Accordingly, it is submitted that although the Calcutta High Court passed the said decision subsequent thereto but the hon'ble Supreme Court held in favour of the assessee and allowed the appeal. 9. In the light of the said decision Mr. Khaitan submitted that the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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