TaxTMI 
TaxTMI 
2005 (10) TMI 75
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....r 1978-79 and on Rs. 1,16,46,083 at Rs. 29,11,521 for the assessment year 1980-81 which was the actual cost to the assessee as at the date of purchase without taking into account the variations in the liability of the assessee on account of fluctuations in exchange rate and the provisions of section 43A of the Act? (3) Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that the investment allowance was not allowable on the increase in the original cost of imported assets due to increase in the assessee's loan liability consequent to the depreciation in the value of Indian currency in foreign exchange market? (4) Whether, on the facts and in the circumstances of the case, the Tribunal erred in not accepting the claim of the assessee that canteen equipment and water coolers are a part of plant and machinery and that, therefore, the assessee was entitled to investment allowance on the same?" The first issue raised is whether the Tribunal was right in law in allowing investment allowance under section 32A of the Income-tax Act, 1961, on calculators for the year 1979-80 and factory cleaning machines for the assessment year 1980-81. The Ass....
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....for the purpose of investment allowance. The Commissioner of Income-tax (Appeals) records that water coolers are a part of the production department for the sustenance of the workers as required under the Factories Act and supplying drinking water to the workers/employees is, therefore, part of the plant and machinery required for its business. It may be further noted that the assessee in the present case is engaged in the activity of manufacturing of ball bearings, taper bearing and textile machinery components. Water cooler supplying drinking water cannot be called apparatus, appliance or fittings. No doubt the Tribunal noted that the water cooler is an amenity that the assessee employer has to provide for its workers, however, the Tribunal upheld the view of the Commissioner of Income-tax (Appeals) that as the water cooler is not directly involved in the manufacturing process of ball bearings, it is not entitled to investment allowance. The learned advocate Mr. Mistry for the assessee submitted that section 32A(iii) lays down conditions for grant of investment allowance in respect of new machinery or plant and only requires that the plant be installed in an industrial underta....
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.... what was allowable had the computation been in Indian currency. The Commissioner of Income-tax by his order under section 263 reduced the depreciation allowable. On a reference, the Calcutta High Court held as follows: "Assessment under the Income-tax Act, 1961, must always be made in Indian rupees according to the Indian Income-tax Act. The Act contemplates a determination of every allowance and every item of income in terms of Indian currency. Therefore, the words 'written down value' and the actual cost to the assessee in section 43(6) contemplates costs of assets in rupees and not any other currency. Depreciation is a kind of loss suffered by the assessee. The loss is determined in terms of money by applying the prescribed percentage on the written down value of the assets in accordance with rule 5 of the Income-tax Rules, 1962." Referring to the said decision, the Tribunal observed that the value of the fixed assets required in any particular currency can be converted into a different currency only at the rate of exchange which prevailed at the time of purchase. The Tribunal also referred to the Karnataka High Court ruling in the case of Kirloskar Electric Co. Ltd. v. C....
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....A(2). In contradistinction, section 43A(1) mentions other allowances intended to be varied which were not based on actual cost such as sections 35(1)(iv), 35A, 36(1)(ix) or for the purposes of section 48. It is pointed out that it was necessary to individually mention these allowances only because they were not automatically varied since they were not based on actual cost as defined under section 43(1). It is submitted that section 43A(1) commences with a non obstante clause which overrides all the other provisions of the Act and must therefore, be given full and proper effect by, inter alia, altering the actual cost for the purposes of section 32A as well. If the Legislature had intended that section 43A(1) was not to apply to section 32A, when introducing section 32A it would have introduced a non obstante clause or added to the exclusions in section 43A(2). It is submitted that there is nothing to suggest that section 43A is not to apply to section 32A and in fact every canon of interpretation demands that section 43A is applicable to section 32A. CIT v. Gujarat State Fertilizers Co. Ltd. [2003] 259 ITR 526 (Guj) [FB]. The only argument of the Revenue is that investment al....