9911796707
TMI Blog1978 (3) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... of only Rs. 5,71,94,305 which alone, according to him, represented the development rebate on the actual cost of the imported ships on the ground that while s. 43A(1) of the I.T. Act provides for extra depreciation allowance on account of the effect of devaluation, there is no provision in the Act for allowing development rebate on the increased liability arising out of devaluation, and s. 43A(2) expressly forbids such a provision. The ITO decided to allow the development rebate of Rs. 5,71,94,305 in the year in which a reserve is created in view of the fact that in the year in question there was a loss. On the assessee's appeal to the AAC, it was found that the ships in respect of which development rebate was claimed by the assessee had been purchased from a foreign country on January 25, 1966, and April 21, 1966, during the accounting year ending December 31, 1966. The original rupee cost of these two ships "Chennai Perumai" and "Chennai Ookkam" was Rs. 2,88,65,083 and Rs. 2,87,40,787, respectively. Due to devaluation of the rupee on June 6, 1966, the revised rupee cost of the ships came to Rs. 4,21,17,856 and Rs. 4,19,12,751. The AAC was of the view that s. 43A(1) applies where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due to the consortium of West German banks and not any portion of the price of the ships and that the increased liability due to devaluation of the rupee cannot be added to the original cost of the ships for the purpose of claiming development rebate. In that view the AAC dismissed the assessee's appeal. In the assessee's further appeal to the Tribunal it was found that the assessee's system of accounting is mercantile. The cost of the fleet of ships of the assessee referable to the payment up to December 31, 1965, was shown in the balance-sheet of the assessee-company as on December 31, 1965, as Rs. 2,76,71,863. But in the balance-sheet as at December 31, 1966, the additions to the fleet were shown as Rs. 18,31,99,728 on the ground that due to the devaluation of the rupee the assessee's liability to the consortium of the West German banks for the ships acquired before the date of devaluation had gone up by Rs. 3,92,16,681 and that the additional liability had been included as addition to the cost of the fleet. The Tribunal held that the increased liability to the consortium of the West German banks due to devaluation of the rupee, which took place after the two vessels had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tual cost of the machinery had increased by Rs. 48,342 consequent on the increase in the rate of exchange on the devaluation of the rupee, as the machinery was acquired before the date of the devaluation. The learned judges have observed that the effect of sub-s. (2) of s. 43A is to exclude the applicability of s. 43A(1) and, therefore, for the purpose of computing the actual cost of an asset for the purpose of deduction on account of development rebate under s. 33 the only statutory provision relevant is s. 43A(1), defining the expression "actual cost". The learned judges upheld the assessee's right to development rebate on the actual cost as defined in s. 43A(1) which admittedly included the sum of Rs. 48,342. That decision will not apply to the facts of the present case for, in that case, the actual cost of the machinery had increased due to the devaluation of the rupee even before the date of the acquisition, unlike the present case. The learned counsel for the assessee invited our attention to the decision of a Bench of the Gujarat High Court in I.T. Ref. No. 30 of 1975 [Arvind Mills Ltd. v. CIT-since reported in [1978] 112 ITR 64], where the question was whether the additiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
