TMI Blog2012 (5) TMI 591X X X X Extracts X X X X X X X X Extracts X X X X ..... by the revenue under section 260A of the Income Tax Act, 1961 (in short, the Act ) against the order dated 30.1.2004 passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'B', Chandigarh (for brevity, the ITAT ) in ITA No.826/Chandi/1998, for the assessment year 1994-95. It was admitted for determination of following substantial question of law:- Whether the Tribunal was correct in law in holding that the value of a capital asset would be notionally enhanced due to foreign exchange fluctuation at the end of the each financial year and not at the time of payment during the year? 3. Briefly, the facts as narrated in ITA No.12 of 2005 may be noticed. For the assessment year 1994-95, the respondent-assessee filed its r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act had been amended w.e.f 1.4.2003 whereas the order in question related to assessment year 1994-95. The ITAT confirmed the order of CIT(A) allowing the claim of depreciation on the enhanced cost of capital asset due to change in the value of Indian rupee. Hence this appeal by the revenue. 4. Learned counsel for the revenue submitted that unless the amount was actually paid on account of exchange rate fluctuation by the assessee, benefit of the same should not have been allowed to the assessee as has been done by the ITAT. Reliance was placed on Apex Court decisions in Commissioner of Income Tax v. Lucas T. V.S.Limited, (2008) 297 ITR 429, Assistant Commissioner of Income Tax v. Elecon Engineering Co. Limited, (2010) 322 ITR 20 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy specifically for the purpose of acquiring the asset (being in either case the liability existing immediately before the date on which the change in the rate of exchange takes effect), the amount by which the liability aforesaid is so increased or reduced during the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate the controversy, the amendment brought about to Section 43A of the Act by Finance Act 2002 effective from 1.4.2003 may also be noticed, which reads thus:- 43A. Notwithstanding anything contained in any other provision of the Act, where an assessee has acquired any asset in any previous year from a country outside India for the purposes of his business or profession and, in consequence of a change in the rate of exchange during any previous year after the acquisition of such asset, there is an increase or reduction in the liability of the assessee as expressed in Indian currency (as compared to the liability existing at the time of acquisition of the asset) at the time of making payment. (a) towards the whole or a part of the cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing observations:- 34. Lastly, we are of the view that the amendment of section 43A by the Finance Act, 2002 w.e.f Ist April, 2003 is amendatory and not clarificatory. The amendment is in complete substitution of the section as it existed prior thereto. Under the unamended section 43A adjustment to the actual cost took place on the happening of change in the rate of exchange whereas under the amended section 43A the adjustment in the actual cost is made on cash basis. This is indicated by the words 'at the time of making payment'. In other words, under the unamended section 43A, 'actual payment' was not a condition precedent for making necessary adjustment in the carrying cost of the fixed asset acquired in foreign curr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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