TaxTMI 
TaxTMI 
2011 (11) TMI 467
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.... prevailing on the last date of the financial year was improper and not permissible under the Act. Foreign exchange rate fluctuations as stipulated under Section 43A cannot be taken into consideration for computing investment allowance. 4. On first appeal filed by the assessee, the order of the Assessing Officer was upheld. 5. On further appeal by the assessee before the Income Tax Appellate Tribunal (the tribunal, for short), by the impugned order dated 25th August, 2003, it was held that the foreign exchange rate fluctuation can be taken into consideration while computing investment allowance. The tribunal after referring to the several decisions did not follow their earlier orders after relying upon decision of the Supreme Court in CIT versus Hindustan Electro Graphites Limited, (2000) 243 ITR 48. 6. We need not refer to the factual matrix in detail as the legal issue pertains to computation of investment allowance on enhanced liability of Rs. 1,71,527/- representing increase in capital cost under Section 43A of the Act. The enhanced investment allowance was claimed on the basis of fluctuation in the foreign currency rate on account of depreciation in the value of the R....
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....ed is quite appropriate and meets the situation fully. 23. For the reasons discussed above, we are of the opinion that the language of the provision is perfectly clear. It cannot be interpreted in a restrictive manner as contended for by the learned counsel for the assessee. In our opinion, it is a clear requirement of the statute that, for purposes of development rebate, any increase or decrease in the actual cost consequent on fluctuations in exchange rate should not be taken into account. It may be that the Legislature intended to give a different treatment to development rebate from depreciation and other allowances because the allowance of development rebate can result in an assessee claiming allowances exceeding the original cost. It may be that the Legislature thought that, though development rebate was intended to promote development of industries, this could not be allowed at the cost of the foreign exchange resources of the country which are also depleted when there is an increase in liability due to devaluation of the currency. It is unnecessary to attribute any particular reason for the provision when the language of the section is otherwise plain and unambiguous. We....
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....being a capital asset referred to in section 50), the cost of acquisition thereof for the purposes of section 48, and the amount arrived at after such addition or deduction shall be taken to be the actual cost of the asset or the amount of expenditure of a capital nature or, as the case may be, the cost of acquisition of the capital asset as aforesaid. Explanation 1.-In this sub-section, unless the context otherwise requires,- (a) „rate of exchange‟ means the rate of exchange determined or recognised by the Central Government for the conversion of Indian currency into foreign currency or foreign currency into Indian currency ; (b) „foreign currency‟ and „Indian currency‟ have the meanings respectively assigned to them in section 2 of the Foreign Exchange Regulation Act, 1947 (7 of 1947). Explanation 2.-Where the whole or any part of the liability aforesaid is met, not by the assessee, but directly or indirectly, by any other person or authority, the liability so met shall not be taken into account for the purposes of this sub-section. Explanation 3.-Where the assessee has entered into a contract with an authorized dealer as defined in secti....
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....sets, in terms of unamended Section 43-A of the 1961 Act is the change in the rate of exchange subsequent to the acquisition of assets in foreign currency. The section mandates that at any time there is change in the rate of exchange, the same may be given effect to by way of adjustment of the carrying cost of the fixed assets acquired in foreign currency. But for Section 43-A which corresponds to Para 10 of AS 11 such adjustment in the carrying amount of the fixed assets was not possible, particularly in the light of Section 43(1). The unamended Section 43-A nowhere required as condition precedent for making necessary adjustment in the carrying amount of the fixed asset that there should be actual payment of the increased/decreased liability as a consequence of the exchange variation. The words used in the unamended Section 43-A were "for making payment" and not "on payment" which are now brought in by amendment to Section 43-A vide the Finance Act, 2002. 57. Lastly, we are of the view that amendment of Section 43-A by the Finance Act, 2002 w.e.f. 1-4-2003 is amendatory and not clarificatory. The amendment is in complete substitution of the section as it existed prior th....