TaxTMI 
TaxTMI 
TaxTMI 
2002 (10) TMI 79
X X X X Extracts X X X X
X X X X Extracts X X X X
.... towards the cost of the assets for the calendar years 1976, 1977 and 1978 (relatable to the assessment years 1977-78, 1978-79 and 1979-80) increased by reason of fluctuation in the foreign exchange rate. The assessee claimed the following amounts for the years under consideration as allowable business expenditure: Year Amount (Rs.) 1976 9,21,658 1977 26,49,336 1978 57,77,322 The claim of the assessee was negatived on the ground that it was capital expenditure. Anticipating such a ruling, the assessee had claimed in the alternative that the aforesaid expenditure went to increase the actual cost of the plant and machinery and, therefore, the assessee was entitled to get additional investment allowance under section 32A of the Act. The Income-ta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to subsequent alteration in the exchange rate in the subsequent years and hence there can arise no question of working out any additional investment allowance in any subsequent year in which the fluctuation takes place. The aforesaid decision was, therefore, clearly in favour of the Revenue, but learned counsel for the assessee successfully persuaded the Division Bench in taking the view that the decision of this court in Windsor Foods Ltd.'s case [1999] 235 ITR 249, required reconsideration because sub-section (1) of section 43A, of which the assessee claimed the benefit, commences with the words "notwithstanding anything contained in any other provision of this Act" and in view of the said non obstante clause, section 43A containing special provision consequential to changes in rate of exchange of currency had an overriding effect over the provisions of section 32A of the Act. Accordingly, the reference has been placed before this Full Bench. We have heard Mr. Akil Kureshi, learned counsel for the Revenue, and Mr. J.P. Shah, learned counsel for the respondent-assessee, and for the intervenors on the merits of the controversy at length. Submissions on behalf of the Revenue: Mr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of installation and first use, because in their case section 43A would not be applicable. (iv) In Arvind Mills Ltd. v. CIT [1978] 112 ITR 64, this court had held that the benefit of fluctuation in foreign currency in the year in which the plant and machinery is purchased and first put to use is available for claiming additional development rebate notwithstanding the provisions of sub-section (2) of section 43A. In appeal (CIT v. Arvind Mills Ltd. [1992] 193 ITR 255) the Supreme Court negatived that view. Hence, the purpose of sub-section (2) of section 43A was intended to deny the benefit of development rebate on account of fluctuation in foreign exchange on a subsequent date after the date of purchase, even in the same year. But in case of investment allowance, the benefit of fluctuation in foreign exchange on a subsequent date in the same year would be available on account of sub-section (1) of section 43A. That does not mean that the absence of the words "investment allowance" or "allowance under section 32A" in sub-section (2) of section 43A would make the assessee eligible for getting additional investment allowance on account of the escalation in the cost of the asset instal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ulating the eight year period prescribed in section 32A(3) to commence from the expiry of each year in which the fluctuation takes place fill the date of last instalment. (iv) The observations of the Supreme Court in CIT v. Arvind Mills Ltd. [1992] 193 ITR 255 support the case of the assessee rather than the case of the Revenue. (v) Section 43A is a beneficial provision inserted with the specific purpose of giving relief to the assessees who have to suffer higher cost of the plant and machinery on account of the fluctuation in the foreign exchange currency. Hence, such a benevolent provision should be liberally construed. In support of this contention, reliance has been placed on the decisions of the apex court in Chandulal Harjivandas v. CIT [l967] 63 ITR 627 (interpretation should be in such a manner as not to nullify the object of the provision), Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188 (SC) (a provision in a taxing statute granting incentives for promoting growth and development should be construed liberally; and since a provision for promoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the object of the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....use, were all claimed and deductions were allowed at the relevant time. The claim is, therefore, confined to the additional liability of Rs. 80,414 which had arisen in the previous year of 1979-80 due to the change in the rate of exchange in repayment of the loans which were taken by the assessee for acquiring the asset in the past." In the absence of indication of the exact year in which the assets were installed and put to use by the assessee in Windsor Foods Ltd.'s case [1999] 235 ITR 249 (Guj), it is not clear whether the year for which the claim for the additional investment allowance was made in that case was within or beyond eight years from the end of the accounting year in which the concerned machinery and plant were installed and first put to use. Section 32A analysed: For the purposes of appreciating the present controversy, section 32A spanning over nine printed pages of the bare Income-tax Act, is required to be analysed in a language as simple as possible. Section 32A of the Act providing for investment allowance prescribes- I. the eligibility for grant of this allowance II. quantification of the allowance and the period during which the allowance can be claimed....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... out of such reserves, the assessee must acquire another asset within ten years from the date of installation of the original asset on which the investment allowance was claimed. (sub-section 4(ii)) (The debiting of this reserve to profit and loss account may be done not only for the accounting year in respect of which the deduction is to be allowed but even for any earlier accounting year which is not earlier than the year of installation. (sub-section 4(ii)) Breach of any of these conditions will entail withdrawal of investment allowance. (sub-sections (4) and (5)) Section 43(1) and section 43A(1): "43. In sections 28 to 41 and in this section, unless the context otherwise requires- (1) 'actual cost' means the actual cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority:... Explanation 8.--For the removal of doubts, it is hereby declared that where any amount is paid or is payable as interest in connection with the acquisition of an asset, so much of such amount as is relatable to any period after such asset is first put to use shall not be included, and shall be deeme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l be worked out in the context of only that part of the outstanding payment and the addition to the actual cost will be made accordingly in that previous year in which the change has taken place. There is, therefore, no scope for revising the cost actually met prior to the date of the fluctuation in the exchange rate. It is only after the date of such fluctuation that the question can arise of revising the actual cost in the manner provided in section 43A(1) during the previous year in which the fluctuation takes place. The actual cost so revised in the previous year will have relevance to the deductions which may be allowable in respect of that previous year and cannot relate back to the earlier previous year so as to retrospectively change the actual cost that prevailed in that year and could not have been altered by foreseeing any change in the exchange rate. In other words, the change in exchange rate cannot project back to the period prior to the date on which such change took effect. We are in respectful agreement with this part of the reasoning of the Division Bench in Windsor Foods Ltd.'s case [1999] 235 ITR 249 (Guj). In view of the clear provisions of sub-section (1) of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ar. Our perspective: What we fail to appreciate is as to why the fluctuation in the foreign exchange rate cannot have any impact by way of addition to (or reduction in) the liability of the assessee to the cost of the asset (where purchase is on credit) or towards the repayment of the loan in foreign currency after the date of change in the foreign exchange rate. More particularly when section 32A(3) itself allows the investment allowance not availed in the year of installation on account of insufficient profits, to be carried forward to the next eight assessment years. In our opinion, in taking the aforesaid view, the Division Bench, with respect, did not give full effect to the non obstante clause with which subsection (1) of section 43A(1) commences nor to the object of introducing section 43A in the Act, nor even to the object underlying the conditions imposed for grant of investment allowance under section 32A of the Act. It is necessary to consider all these aspects in view of the following settled principles of interpretation of statute which are recently summarised by the apex court in British Airways Plc. v. Union of India, AIR 2002 SC 391: "7. While interpreting a sta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r the foreign exchange rate at the end of the previous year in which the asset is purchased and first put to use. In view of the almost constantly increasing liability of the assessees to pay higher amounts in terms of the rupee on account of decline in the value of the rupee vis-a-vis foreign currencies like dollars, sterling pounds, etc., the assessees were not getting the benefits under the Income-tax Act in respect of the increased cost of acquisition on account of such changes in the rate of exchange of currencies. It was in order to relieve the assessees from this hardship that Parliament introduced section 43A containing special provisions consequential to changes in rate of exchange of currency. The section was introduced by the Finance (No. 2) Act, 1967, with effect from April 1, 1967. Scheme of section 32A: The scheme of section 32A is that the assessee who purchases a new plant and machinery is to be given the incentive of investment allowance to the extent of 25 per cent. of the actual cost of the machinery/plant to the assessee-subject to fulfilment of certain conditions: (i) No investment allowance on mere purchase The assessee must have put the asset to use in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....riginal asset. Here also the legislative intent is clear-the incentive is for one who continues the industrial/professional activity by purchasing another asset within the ten year period. Entrepreneurs are expected to come out with a new burst of energy at least once in ten years, if they want to retain the benefit of investment allowance. Interplay between section 32A and section 43A(1): The question which really arises for our consideration is what is the impact of the non obstante clause with which sub-section (1) of section 43A begins, on section 32A and to what extent. Mr. Kureshi, learned counsel for the Revenue, submitted that the only limited impact which the said non obstante clause has on the working out of investment allowance under section 32A is that without the said non obstante clause, the assessee would not be able to modify or change the cost of acquisition of the asset even if there was a fluctuation in the rate of foreign exchange after the date of acquisition in the same year in which the asset is acquired. For instance, a specified asset was acquired on May 10, 1994, at a cost of US $ 1,44,000 by taking loan from a financial institution repayable in 12 year....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lowance under section 32A would be unworkable. Section 32A provides for grant of investment allowance at the rate of 25 per cent. of the cost of the asset subject to various conditions. One of these conditions is that an amount equal to 75 per cent. of the investment allowance to be actually allowed is debited to the profit and loss account and credited to the reserve account to be utilised for the purpose of acquiring a new machinery or plant, before the expiry of a period of ten years from the previous year in which the machinery or plant in question was installed and first put to use. If the assessee's arguments were to be accepted and the fluctuation in the foreign exchange rate even in the 11th or 12th year after the year of installation and first user were to be taken into account, the whole scheme would be unworkable and the condition aforesaid would be incapable of being complied with in so far as the additional liability on account of the foreign exchange fluctuation taking place in the 11th or 12th year was concerned. On the other hand, Mr. J.P. Shah, learned counsel for the assessee, sub mitted that the non-obstante clause in section 43A(1) has to be given full play and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he date of acquisition. However, once the fluctuation takes place, in respect of the liability outstanding on that date, section 43A(1) does come into play. If the contention of the Revenue were to be accepted, the relevant portion of section 43A would have to be read in the following terms: "in consequence of a change in the rate of exchange at any time after the acquisition of such asset but before the expiry of the previous year in which such asset was acquired, there is an increase or reduction in the liability of the assessee..." The interpretation canvassed by learned counsel for the Revenue thus not only does grave violence to the language employed by the Legislature but also nullifies the object and language of section 43A in the matter of grant of investment allowance under section 32A of the Act, notwithstanding the non-obstante clause with which sub-section (1) of section 43A begins. In the illustration given in para. 19 above, the actual cost of the asset to the assessee is US $ 1,44,000 and not the rupee equivalent thereof. Because, for the accounting year of installation of the asset (i.e., 1994-95), the accounts are not to be maintained in two separate currencies,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-------------------------------------------------------------- 1-4-1996 US $ 1000 36 36,000 34,000 2,000 1-5-1996 US $ 1000 36 36,000 34,000 2,000 1-6-1996 US $ 1000 37 37,000 34,000 3,000 1-7-1996 US $ 1000 37 37,000 34,000 3,000 1-8-1996 US $ 1000 37 37,000 34,000 3,000 1-9-1996 US $ 1000 38 38,000 34,0....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce Act, 1976, with effect from April 1, 1975, reads as under: "Explanation 8.--For the removal of doubts, it is hereby declared that where any amount is paid or is payable as interest in connection with the acquisition of an asset, so much of such amount as is relatable to any period after such asset is first put to use shall not be included, and shall be deemed never to have been included, in the actual cost of such asset." Hence, the interest paid by the assessee on the loan taken for purchasing the asset or the interest paid by the assessee to the supplier for purchasing the asset on deferred payment basis cannot be included in the actual cost of the asset. The court can, therefore, safely infer that the Legislature intended that the principal amount of instalments which the assessee pays for repayment of the loan would form a part of the actual cost of the asset to the assessee. Hence, whatever higher amount the assessee pays in Indian currency at the time of payment of the instalment with reference to the bench mark rate would go to add to the actual cost of the asset. At this stage reference may be made to the fact that the Income-tax Officer had rejected the assessee's cl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of the Revenue. The benefit of sub-section (1) of section 43A is not available in case of development rebate because of specific exclusion thereof by virtue of sub-section (2) of section 43A inserted by the Finance (No. 2) Act of 1967, with effect from April 1, 1967. While inserting section 32A by the Finance Act of 1976, the Legislature was conscious of the two different allowances being development rebate and investment allowance which is clear from clause (c) of sub-section (1) of section 32A making specific mention of development rebate. However, in 1976 or thereafter the provisions of sub-section (2) of section 43A were not amended so as to exclude investment allowance also from the benefit of sub-section (1) of section 43A. For the aforesaid reasons, we are in respectful agreement with the view taken by the Patna High Court in Usha Beltron Ltd. v. CIT [1999] 238 ITR 133, that the omission on the part of the Legislature in not mentioning "investment allowance" in the body of existing sub-section (2) of section 43A, while enacting section 32A in 1976, was conscious and deliberate and that once the provisions of the statute are clear, there is no justification for reading the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e purposes of section 32A till the last instalment of the loan is paid by the assessee which may be for a period of 12 or even 20 years from the year in which the asset was installed and first put to use. We are unable to accept the contention of learned counsel for the assessee that such an interpretation should be accepted. In our view, section 43A of the Act had the limited object of providing relief to the assessee on account of change in the rate of foreign exchange. The provisions of section 43A incorporated by the Finance (No. 2) Act of 1967, with effect from April 1, 1967, could not have intended to modify the entire scheme of section 32A for grant of investment allowance which was inserted by Parliament by the Finance Act, 1976, with effect from April 1, 1976, and which we have explained in detail in paragraph 18 hereinabove. As already explained above, section 43A was intended to relieve the assessees of one and only one hardship--i.e., increase in liability on account of increase in the rate of foreign exchange. Sub-section (1) of section 43A commencing with the non obstante clause could not have intended, and did not intend, to do away with the conditions imposed by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e is nothing in section 43A(1) which changes the scheme for investment allowance or any other allowance or deductions under other provisions of the Act except for the limited purpose as already explained earlier in this judgment. Otherwise, the entire scheme of section 32A imposing a mandatory condition on the assessee to acquire another asset from out of the investment allowance reserve account within ten years from the expiry of the year of installation of the asset would become unworkable, if the assessee were to be allowed to claim investment allowance even after ten years from the year of installation. May be the assessee who has acquired the asset from a foreign supplier by taking deferred payment facility or on loan repayable in foreign currency for a period of 12 or 20 years may find the period of eight years too short for claiming investment reserves, but then that period was stipulated by Parliament in 1976, after insertion of section 43A in 1967 and, therefore, the appeal for providing a longer period for claiming investment allowance beyond eight years from the year of installation must be made to the Legislature. After all there is no fundamental right to get investmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessee on the Explanation to section 32A(4)(ii) helps the assessee in stretching his case beyond the maximum period of eight years. In case the Assessing Officer computes the total income of a given year higher than the one returned by the assessee and consequently a higher amount of investment allowance is admissible for that year, the Assessing Officer shall give a notice granting opportunity to the assessee to make good the short fall in the investment allowance reserve account in the year of service of such notice or in the immediately preceding accounting year if the accounts thereof are not closed. (Explanation to sub-section (4)). As the analysis of section 32A in paragraph 10 of this judgment indicates, the conditions including the condition imposed by sub-section (4)(ii) of section 32A do not and cannot enlarge the maximum period stipulated by sub-section (3) of section 32A in mandatory terms for availing of the investment allowance. "No portion of the investment allowance shall be carried forward for more than eight assessment years immediately succeeding the assessment year relevant to" the year of installation of the asset. On the contrary, if anything, the prov....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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." It is pertinent to note that the Calcutta High Court was dealing with a case where the fluctuation in the foreign exchange rate took place in the year 197879. It is not clear, however, as to exactly in which year the plant or machinery was first put to use. The Calcutta High Court was not called upon to decide the controversy whether such investment allowance can be allowed on account of the increased liability resulting from fluctuation in foreign exchange which takes place beyond eight years from the year of installation of the asset. Hence, the said decision, though in line with the principles being laid down by us, does not support the contention of the assessee that the benefit of section 43A would be available for getting higher investment allowance even if the fluctuation takes place beyond eight years from the year of installation. In Usha Beltron Ltd. v. CIT [1999] 238 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tallation of the asset. In our considered view, therefore, any increase/reduction in the liability of the assessee towards the cost of acquisition of the asset on account of fluctuation in the rate of foreign exchange would be admissible for the purpose of investment allowance if such fluctuation has taken place in the previous year in which the asset is installed and first put to use, and in the subsequent eight assessment years from the date of expiry of the year of installation and first use. Any fluctuation in the rate of foreign exchange beyond the aforesaid period of eight years would not have any impact on the question of investment allowance. One more question which is required to be considered is what would be the position if the assessee had already taken the benefit of the investment allowance before the expiry of the eight year period as stated above say, in the 4th year. The liability to repay the loan for purchasing the asset is to be totally discharged in the 12th year and the fluctuation in the foreign exchange rate takes place, say, in the 5th, 6th, 7th and/or 8th year from the expiry of the year in which the asset was installed and first put to use. Learned cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt of change in the rate of foreign exchange within the period of eight years would be relevant for the grant of investment allowance in the year in which the fluctuation takes place, provided there was existing liability immediately before the date of effect of the change in foreign exchange rate. There is nothing in section 32A which can deny the assessee this benefit of investment allowance on the additional cost of the asset on account of fluctuation of foreign exchange rate within the eight year period. The view that we have taken is that the working out of the cost of acquisition for the benefit of investment allowance under section 32A is subject to modification under sub-section (1) of section 43A of the Act and that such modification is to be given for the particular instalments in foreign currency which become due and payable on and after the date of fluctuation in the foreign exchange rate. Of course, the claim for such additional investment allowance would also be subject to the conditions stipulated in sub-sections (3) and (4) of section 32A of the Act, that is, without extending the outer period of eight years (from the date of expiry of the year of first user of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ange which takes place after the expiry of the aforesaid period of eight years. (iii) Additional investment allowance on account of fluctuation in foreign exchange rate will be computed only in respect of the additional liability on the principal amount of cost or loan repayment towards the cost price, and not in respect of interest component of the payment (vide Explanation 8 to section 43(1)), for which deduction would be available as business expenditure under section 36(1)(iii). (iv) Even if the assessee had claimed full investment allowance before the date of fluctuation on the basis of the cost of the asset as earlier worked out for the period prior to the date of fluctuation, the assessee, who had taken loan or credit in foreign currency for purchasing the plant/machinery, would be entitled to claim additional investment allowance on the basis of any such fluctuation in foreign exchange which takes place within the aforesaid period of eight years, provided there was an outstanding liability in foreign currency towards payment of the cost of the asset on the date immediately prior to the date of fluctuation. In other words, if the cost of the asset goes up on account of any....
X X X X Extracts X X X X
X X X X Extracts X X X X
....said expenditure went to increase the actual cost of the plant and machinery and hence the assessee should be granted investment allowance under section 32A of the income-tax Act, 1961 ("the Act"). The Income-tax Officer rejected the claim of the assessee stating that conditions for applicability of section 32A were not satisfied. The Commissioner of Income-tax (Appeals), before whom the assessee went in appeal held that the order of the Income-tax Officer was correct because the years under consideration are not the years when the assets were either installed or first put to use, and this was the basic requirement for applicability of section 32A of the Act. The Income-tax Appellate Tribunal, in the second appeal preferred before it upheld the claim of the assessee on the basis of the reasons stated in earlier orders wherein development rebate had been granted to the assessee in the same set of facts and circumstances. The Tribunal has raised the following question of law at the instance of the Commissioner of Income-tax for the opinion of this court: "Whether, the Tribunal has been right in law and on facts in holding that the assessee is entitled to investment allowance on acc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n takes place. The actual cost so revised in the previous year will have relevance to the deductions which may be allowable in respect of that previous year and cannot relate back to the earlier previous year so as to retrospectively change the actual cost that prevailed in that year and could not have been altered by foreseeing any change in the exchange rate. In other words, the change in exchange rate cannot project back to the period prior to the date on which such change took effect. The deduction of investment allowance can be allowed in respect of the previous year in which the machinery was installed or first put to use. If the deduction becomes allowable in that relevant previous year, the full investment allowance is to be worked out on the basis of the actual cost of the machinery or plant to the assessee at that relevant time. That quantification of the amount at 25 per cent. of the actual cost to be allowed by way of deduction as investment allowance got crystallised on the basis of the actual cost and no change can be made therein for that previous year on the basis of any fluctuation that takes place in the exchange rate in the subsequent years which will have impact....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er scope for granting any further deduction. Referring to the provision of section 43A of the Act, it was submitted that it does not permit reopening of accounts nor does it provide for any relating back, which would be necessary if the contentions of the assessee were to be accepted. It was further submitted that the phrase "during the previous year" used in section 43A of the Act should be read to mean only that previous year in which deduction under section 32A would otherwise be available and it cannot be read to mean that investment allowance which has already been granted has to be changed. He further contended that section 43 opens with the phrase "unless the context otherwise requires" and on harmonious reading of section 43(1), section 32A and section 43A of the Act, the legislative intention should be inferred as held in the case of CIT v. Windsor Foods Ltd. [1999] 235 ITR 249 (Guj). That by the operation of the non-obstante clause in section 43A of the Act as suggested by the assessee the restrictive conditions in section 32A would stand negatived. Apart from heavy reliance on the decision of the Division Bench of this court in the case of CIT v. Windsor Foods Ltd. [1999....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ardinal principle of construction of a statute that effort should be made in construing the different provisions so that each provision will have its play and in the event of any conflict a harmonious construction should be given. The well known principle of harmonious construction is that effect shall be given to all the provisions and for that any provision of the statute should be construed with reference to the other provisions so as to make it workable. A particular provision cannot be picked up and interpreted to defeat another provision made in that behalf under the statute. It is the duty of the court to make such construction of a statute which shall suppress the mischief and advance the remedy. While interpreting a statute the courts are required to keep in mind the consequences which are likely to flow upon the intended interpretation." (British Airways Plc. v. Union of India [2002] 2 SCC 95, 100; AIR 2002 SC 391): Section 32A of the Act which deals with investment allowance was inserted by the Finance Act, 1976, with effect from April 1, 1976. Sub-section (1) of the said section provides that in respect of a ship or an aircraft or machinery or plant specified in sub-s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... mean the actual cost of the assets to the assessee. For the present it is not necessary to deal with the proviso or Explanation under the said clause. Section 43A of the Act was inserted by the Finance (No. 2) Act, 1967, with effect from April 1, 1967. The said section pertains to special provisions consequential to change in the rate of exchange of currency. Sub-section (1) of section 43A lays down that notwithstanding anything contained in any other provision of the Act, where an assessee has acquired any asset from a country outside India for the purpose of his business 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 in Indian currency for making payment towards the whole or a part of the cost of the asset, the amount by which the liability aforesaid is so increased or reduced shall be added to or reduced from the actual cost of the asset as defined in section 43(1) and the amount arrived at after such addition/reduction shall be taken to be the actual cost of the asset. Therefore, it is apparent that: (a) the provision overrides any other provision of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hrow any further light as regards the controversy at hand. The apprehension to the effect that provisions relating to carry forward of unabsorbed investment allowance and creation of investment allowance reserve and utilisation of the said reserve within the specified time limits would become unworkable if the assessee's claim is upheld is unfounded. The approach advocated by the Revenue goes against the well-settled cannons of construction. It cannot be permitted to pick up sub-sections (3) and (4) of section 32A of the Act to defeat the operation of section 43A of the Act. Moreover, the question before the court is whether investment allowance is available on enhanced actual cost. The submission on behalf of the Revenue that even if such enhanced actual cost is considered for grant of investment allowance, the actual allowance should adhere to the statutory limitation laid down in sub-sections (3) and (4) of section 32A requires to be stated to be rejected. There is no such restriction prescribed in section 43A of the Act: it merely states "Notwithstanding anything contained in any other provision of this Act...... Taking into consideration the object of the provision, viz., se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to the specified extent in the year of such change in the figure of actual cost. The period of carry forward for the purpose of eight years shall have to be computed from the said year and similarly the period of utilisation of the investment allowance reserve shall have to be computed from the said year. This would of course be only in relation to the enhanced cost of the asset i.e., the deduction would be available to the extent of 25 per cent. of the enhanced cost, reserve will have to be created to the extent of 75 per cent. of the enhanced cost. The provision of section 32A of the Act nowhere provides that investment allowance cannot be allowed beyond the year of acquisition/installation/first put to use where the actual cost stands modified due to application of section 43A of the Act. On the contrary there are inherent indications in the scheme of section 32A of the Act which go to show that an assessee can claim deduction of a higher amount of investment allowance on fulfilment of the statutory condition prescribed. The creation of reserve and allowance have been linked with availability of sufficient profits. Sub-section (4) provides for creation of investment allowance r....