TaxTMI 
TaxTMI 
2009 (1) TMI 427
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....: "43A.(1) Notwithstanding anything contained in any other provisions 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 assets, 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, o....
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.... capitalise such liability. It is common knowledge that the rate of exchange fluctuates every day depending on the conditions prevailing in the International Monetary Market but such fluctuation in conversion cannot be taken into account unless, at the time of actual payment of the liability in foreign currency, there has been, in fact, an additional liability. It is, therefore, necessary to ascertain in every case whether the assessee incurred any additional liability on the date of repayment or not. Only if any additional liability is incurred on the date of repayment due to change in the rate of conversion, such liability will be added to the cost of the capital asset and benefit of depreciation and investment allowance will be allowed on such added cost." 4. Consequently, the court after taking into account the facts of the said case came to the conclusion that the assessee would be entitled to investment allowance on such sum as may be found to represent any additional liability on the date of actual payment of the loan arising due to fluctuation in the rate of conversion and the Income-tax Officer shall allow the assessee an opportunity of creating reserve in respect of....
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....992] 196 ITR 447. Mr. Khaitan further drew our attention to the decision of the hon'ble Supreme Court reported in CIT v. Arvind Mills Ltd. [1992] 193 ITR 255 where the court held that section 43A in fact introduced to provide for the treatment of the situation created by the devaluation of the rupee. It specifically enacts that the amount of increase or decrease in the liability due to exchange rate fluctuation should be adjusted against the actual cost or the capital expenditure or the cost of acquisition only in relating to five provisions of the Act referred to in the section. Where the terms of sub-section (1) of section 43A are fulfilled in any case, it is mandatory to take the actual cost, capital expenditure or cost of acquisition at the higher or lower figure for the purposes of the provisions mentioned therein irrespective of whatever might have been the position independent of the section. The non obstante clause with which' the section begins, indeed, makes it clear that, if the position had been different otherwise it cannot prevail after the introduction of this section. Equally, even if the position would have been the same otherwise, that would be no justification to....
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....dingly, it is submitted that although the Calcutta High Court passed the said decision subsequent thereto but the hon'ble Supreme Court held in favour of the assessee and allowed the appeal. 9. In the light of the said decision Mr. Khaitan submitted that the appellant is entitled to get the benefit of the said difference and should be permitted to get the investment allowance on the increased cost. Mr. Khaitan also cited the decisions reported in New India Industries Ltd. v. CIT [ 1993] 203 ITR 933 (Guj), Padamjee Pulp and Paper Mills Ltd. v. CIT [1994] 210 ITR 97 (Born), CIT v. Motor Industries Co. Ltd. (No. 2) [1998] 229 1TR 137 (Karn), Associated Bearing Co. Ltd. v. CIT [ 286 ITR 341 (Born), CIT v. Woodward Governor India P. Ltd. [2007] 294 hR 451 (Delhi). In all these cases this point has already been dealt with in such situation and followed the decision of the hon'ble Suprerne Court. 10. He further relied on a latest Supreme Court decision reported in CIT v. Gujarat Siddhi Cement Ltd. [2008] 307 1TR 393 where the court held that section 43A(1) clearly related to the fluctuation of the exchange rate in the previous year in question in relation to investment allowance; an....