Development rebate cannot be claimed on rupee devaluation-related cost increases; rectification was legally sustainable.

Section 43A of the Income-tax Act requires exchange-rate fluctuations to be ignored when determining actual cost for development rebate. On that basis, any increase in asset cost attributable to devaluation of the rupee could not support a higher rebate claim. The withdrawal of the rebate through rectification was therefore legally sustainable, because the enhanced cost did not qualify for development rebate under the statute.

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Issues: Whether the assessee was entitled to development rebate on the increased cost of an asset arising from devaluation of the rupee, and whether the rectification withdrawing that rebate was valid.

Analysis: Section 43A of the Income-tax Act, 1961, requires that for the purpose of development rebate any increase or decrease in actual cost due to fluctuation in exchange rate is to be ignored. In view of this statutory mandate, the increased cost attributable to devaluation could not form the basis for claiming development rebate. The rectification order was therefore supported by the applicable legal position.

Conclusion: The assessee was not entitled to development rebate on the enhanced cost arising from devaluation, and the rectification was valid.

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