TMI Blog2011 (11) TMI 467X X X X Extracts X X X X X X X X Extracts X X X X ..... st under Section 43A on account of fluctuations in foreign currency rates? 2. The respondent-assessee is a company and the assessment year involved is 1989-90. 3. The Assessing Officer while computing investment allowance under Section 32A of the Income Tax Act, 1961 (the Act, for short) has held that the addition of Rs.1,76,175/- to the plant and machinery under Section 43A for computing investment allowance on account of foreign exchange rate prevailing on the last date of the financial year was improper and not permissible under the Act. Foreign exchange rate fluctuations as stipulated under Section 43A cannot be taken into consideration for computing investment allowance. 4. On first appeal filed by the assessee, the order of the Assessing Officer was upheld. 5. On further appeal by the assessee before the Income Tax Appellate Tribunal (the tribunal, for short), by the impugned order dated 25th August, 2003, it was held that the foreign exchange rate fluctuation can be taken into consideration while computing investment allowance. The tribunal after referring to the several decisions did not follow their earlier orders after relying upon decision of the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of sub-section (1) should not be applied for purposes of development rebate. The effect is that the adjusted actual cost is to be taken as the actual cost for all purposes other than for grant of development rebate. Read thus, there is no difficulty in the application of the language of the section to the present case. There is no inappropriateness of language either in sub-section (1) or in sub-section (2). The language used is quite appropriate and meets the situation fully. 23. For the reasons discussed above, we are of the opinion that the language of the provision is perfectly clear. It cannot be interpreted in a restrictive manner as contended for by the learned counsel for the assessee. In our opinion, it is a clear requirement of the statute that, for purposes of development rebate, any increase or decrease in the actual cost consequent on fluctuations in 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 allowances exceeding the original cost. It may be th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the liability aforesaid is so increased or reduced during previous year shall be added to, or, as the case may be, deducted from, the actual cost of the asset as defined in clause (1) of section 43, or the amount of expenditure of a capital nature referred to in clause (iv) of sub-section (1) of section 35 or in section 35A or in clause (ix) of sub-section (1) of section 36, or, in the case of a capital asset (not being a capital asset referred to in section 50), the cost of acquisition thereof 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. Explanation 1. In this sub-section, unless the context otherwise requires, (a) rate of exchange‟ means the rate of exchange determined or recognised by the Central Government for the conversion of Indian currency into foreign currency or foreign currency into Indian currency ; (b) foreign currency‟ and Indian currency‟ have the meanings respectively assigned to them in section 2 of the Foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income Tax, Delhi verses Woodward Governor India Private Limited, (2009) 13 SCC 1, wherein Section 43A was examined with reference to foreign exchange fluctuation and the exchange rate prevailing at the end of the financial year. It has been held in Wood Ward Governor India Private Ltd. (supra) as under:- 56. As stated above, what triggers the adjustment in the actual cost of the assets, in terms of unamended Section 43-A of the 1961 Act is the change in the rate of exchange subsequent to the acquisition of assets in foreign currency. The section mandates that at any time there is change in the rate of exchange, the same may be given effect to by way of adjustment of the carrying cost of the fixed assets acquired in foreign currency. But for Section 43-A which corresponds to Para 10 of AS 11 such adjustment in the carrying amount of the fixed assets was not possible, particularly in the light of Section 43(1). The unamended Section 43-A nowhere required as condition precedent for making necessary adjustment in the carrying amount of the fixed asset that there should be actual payment of the increased/decreased liability as a consequence of the exchange variation. The wo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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