TMI Blog1999 (4) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... bles. It acquired plant and machinery from outside India in connection with its business. The plant and machinery were installed and put to use from October 1, 1988, when the company commenced its commercial production. For the assessment year 1989-90 corresponding to the accounting year 1988-89 ending on March 31, 1989, the assessee increased the cost of plant and machinery by Rs. 25,00,493 in view of the provisions of section 43A of the Income-tax Act on account of fluctuation in exchange rate, and claimed depreciation as well as investment allowance on the increased cost. The Assessing Officer did not grant either depreciation or investment allowance on the increased cost on the ground that there was no actual remittance to the foreign supplier during the period. The asses-see went up before the Commissioner of Income-tax (Appeals) in appeal who upheld the order of the Assessing Officer. The assessee moved the Income-tax Appellate Tribunal in second appeal. The Tribunal relying on a decision of the Supreme Court in CIT v. Arvind Mills Ltd. [1992] 193 ITR 255, allowed the assessee's claim as regards depreciation on the increased cost of the plant and machinery. However, again rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame thing. That being so, according to him, the provisions of sub-section (2) of section 43A should be held to be applicable to the investment allowance as well. The investment allowance would, thus, stand out of the purview of section 43A(1) of the Act. At this stage, section 43A of the Act may be quoted as hereunder : "43A. (1) Notwithstanding anything contained in any other provision 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 the acquisition of such asset, there is an increase or reduction in the liability of the assessee as expressed in Indian currency for making payment towards the whole or a part of the cost of the asset or for repayment of the whole or a part of the moneys borrowed by him from any person, directly or indirectly, in any foreign currency 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation earlier allowed on the basis of the old cost... So far as development rebate is concerned, however, a difficulty will arise because it is a one-time allowance which has to be allowed in the year in which the machinery or plant has been acquired, installed or brought to use. If the actual cost has already been determined at the original price and development rebate has been granted on that footing to the assessee and an increase in liability arises later, it is possible for the Department to contend that since the actual cost has already been determined and development rebate fixed on that footing there is no possibility or necessity for reconsidering the issue though it may perhaps contend tc the contrary if the fluctuation in exchange rate had resulted in a decrease in liability. On the other hand, the assessee may contend that, since the figure of actual cost has undergone a modification as a result of the currency revaluation, the assessment for the year in which development rebate was allowed should be reopened and the actual cost as well as the development rebate should be recomputed ; or, if this is not possible, that the actual cost should be reworked at least in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as early as in 1955 in the Indian Income-tax Act, 1922. After the provision was incorporated in the 1961 Act, it underwent amendments in 1963 and 1965 by Acts 43 of 1963 and 15 of 1965. The provision in its present form was substituted in 1967 by Act 20 of 1967. It was by that Act that section 43A was also added in the Income-tax Act. The provision regarding investment allowance was introducted for the first time in 1976 by Act 66 of 1976. As both the provisions have held the field together, it is difficult to accept the contention of Mr. Vidyarthi that they are one and the same thing. It was rightly submitted by Mr. Jain that while introducing the provision regarding investment allowance by adding section 32A in the Act the Legislature was supposed to be aware of the provision regarding development rebate in section 33. This becomes more evident from the fact that the provision regarding development rebate finds specific mention in clause (c) of the second proviso to sub-section (1) of section 32A of the Act. It is to be kept in mind that the same Act, i.e., Act 20 of 1967, inserted section 43A and also amended the substantive provisions regarding development rebate by substitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e out from section 43A nor does it appear from the Tribunal's order. As a matter of fact, the Tribunal apparently rejected the contention of the Department to that effect as otherwise, on the ground that no remittance was made, it should have disallowed depreciation allowance as well, provided of course, that this was the requirement of law. The fact that the Tribunal allowed depreciation allowance is indicative of the fact that the Department's contention in this regard was not accepted. In the above premises, the decision of the Tribunal disallowing investment allowance was not correct in law. Before I conclude I must mention that the claim regarding investment allowance on the increased liability in terms of section 43A has been allowed by the Tribunal in the case of the assessee-company itself for the subsequent assessment years, namely, 1990-91 and 1991-92, vide ITA Nos. 896 and 897/Patna of 1994 decided on March 19, 1998. In the above premises, the questions referred for the opinion of this court are answered in the negative, i.e., in favour of the assessee and against the Revenue. Let a copy of this judgment be sent to the Income-tax Appellate Tribunal, Patna Bench, Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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