TMI Blog2002 (8) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... ery, necessitated by the fluctuation in foreign exchange rates is allowable to the assessee in the respective years in which such cost arose?" - The second question referred to us is, therefore, answered in favour of the assessee and, against the Revenue. - - - - - Dated:- 20-8-2002 - Judge(s) : R. JAYASIMHA BABU., K. P. SIVASUBRAMANIAM. JUDGMENT The judgment of the court was delivered by R. JAYASIMHA BABU J.-Two questions have been referred to us, one at the instance of the assessee, and the other at the instance of the Revenue. The assessment years are 1985-86, 1986-87 and 1987-88. The question referred at the instance of the assessee is, "Whether, on the facts and in the circumstances of the case, and on a proper constructi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate item, and the amount of duty paid thereon is to be deducted from the value of the closing stock of those finished products. That contention was rejected by the assessing authority, as also by the Commissioner and the Tribunal. Learned counsel for the assessee sought to derive support for his case by placing reliance on the decision of this court in the case of CIT v. English Electric Co. of India Ltd. [2000] 243 ITR 512. The court therein held that the excise duty payable on the closing stock did not form part of the value of the closing stock. In this case, the excise duty had actually been paid and was not a mere liability. The finished products on which the duty had been so paid had also been moved from the assessee's godowns to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h duty, it necessarily constituted a part of the cost of the raw material to the assessee. The value of that imported raw material would not undergo any change depending on whether it is used up in the course of manufacture, or is stored in the godown to be used at future point of time in the course of manufacture. The value of the imported raw material was, therefore, required to be shown uniformly when it was used up in the process of manufacture, as, also when it was required to be valued as part of the closing stock by including the customs duty component. The assessee itself had rightly followed that method, and that method is in accord with the established accounting practices. Learned counsel for the assessee submitted that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the fluctuation in foreign exchange rates is allowable to the assessee in the respective years in which such cost arose?" "Investment allowance" is provided for in section 32A of the Act. That allowance is a portion of the "actual cost" to the assessee of the ship, aircraft, machinery or plant. Section 43A of the Act makes a special provision consequential to the changes in the rate of exchange of currency. That provision was introduced by the Finance (No. 2) Act, 1967, with effect from April 1, 1967. Section 43A(1) of the Act opens with a non obstante clause and provides that if the assessee had 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Central Board of Direct Taxes explaining the scope of section 43A of the Act, the relevant part of which reads thus: "62. The provisions of the new section 43A apply in a case where an assessee has acquired any capital asset from abroad for the purpose of his business or profession, on credit or on deferred payment terms, or against a loan in foreign currency, and the whole or a part of the cost of such asset or of the loan in foreign currency, is outstanding as on the date on which there is a change in the rate of exchange of currency. In such a case where, in consequence of the change in the rate of exchange of currency, there is an increase or reduction in the assessee's liability as expressed in Indian currency for payment of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility for the assessee arose in the year subsequent to the date of installation does not come in the way of the investment allowance being allowed to the assessee. Section 43A(1) of the Act refers to the amount by which the liability of the assessee is so increased or reduced 'during the previous year'. The increase in the liability of the assessee during the previous year on account of the change in the rate of exchange is part of the actual cost of the machinery acquired from a foreign country and the assessee is entitled to investment allowance on the additional cost." The submission made by counsel for the Revenue that that judgment is per incuriam, as the case of Arvind Mills Ltd. [1992] 193 ITR 255 (SC), had not been referred to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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