TaxTMI 
TaxTMI 
2002 (10) TMI 79
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....rs. The liability for the instalments 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 all....
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....tified allowance cannot be varied by giving back effect 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 contr....
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....asers from the local market would get it only for eight years from the year 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 inv....
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....onal cost in the cost of acquisition in the year of installation and first user or by calculating 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....
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....he assessee in that past relevant previous year when the machinery or plant were installed and put to 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....
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....the assessee must create a reserve (investment allowance reserve account) to the extent of 75 per cent. of investment allowance availed. From 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 acq....
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.... of fluctuation in the exchange rate. Thus, if on such date only a part of the cost of the acquired asset is outstanding for payment, the exchange rate fluctuation will 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 agre....
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.... 80,414 being the additional liability that arose due to fluctuation in foreign exchange rate in respect of the payments of outstanding instalments of machinery in a subsequent year. 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 ....
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.... he would get such benefits only on the basis of the cost of the asset in terms of the Indian currency as per the foreign exchange rate at the time of acquiring the asset or at the most as per 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. o....
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....ccount) to the extent of 75 per cent. of the investment allowance availed of, out of which the assessee must acquire another asset within ten years from the expiry of the year of installation and first user of the original 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 d....
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....on 43A and that the view taken therein is not required to be changed. Mr. Kureshi for the Revenue further submitted that if the interpretation canvassed by the assessee were to be accepted, the whole scheme of investment allowance 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 exch....
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....raph 13 above we are in respectful agreement with the Division Bench in Windsor Foods Ltd.'s case [1999] 235 ITR 249 (Guj), that the fluctuation in foreign exchange rates subsequent to the date of acquisition cannot relate back to the 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 ac....
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.... (c) (d) (e) (f) ----------------------------------------------------------------------------- 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 &nbs....
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....unt. Clause (1) of section 43 specifically pro vides that for sections 28 to 41 (which would also include section 32A) unless the context otherwise requires, "actual cost" means the actual cost of the asset to the assessee....Explanation 8 to clause (1) which was inserted by the Finance 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, whatev....
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....by learned counsel for the Revenue that since the investment allowance is similar in nature to development rebate, by virtue of sub-section (2) of section 43A investment allowance also stands excluded from the benefit of sub-section (1) of section 43A. We are unable to accept the aforesaid contention 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 ....
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.... use will not entitle the assessee to investment allowance on such addition to the cost of the asset. Can the variation in foreign exchange rate have any impact on investment allowance beyond the eight year period? The question, however, still remains whether the effect of fluctuation would continue for the 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, sec....
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....longer period for availing of the investment allowance than the assessee acquiring the asset from the local market. The eight assessment years following the assessment year relevant to the year of installation/first user is the maximum period allowed by the Legislature to all for availing the investment allowance and there 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 ....
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....inition of the term "actual cost" in section 43(1) so as to take care of the addition to (or reduction in) the liability for payment on account of fluctuation in foreign exchange rate without extending the period covered by sub-section (3) of section 32A. It is difficult to appreciate how reliance placed by Mr. J.P. Shah for 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....
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.... 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." 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, th....
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....eriod. The decisions of the Calcutta, Patna and Madras High Courts thus do not support the contention of the assessee, in so far as it is contended that the assessee's claim for additional investment allowance on account of fluctuation in foreign exchange rate has to be accepted even beyond the period of eight assessment years from the year of installation 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 e....
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....al cost of the asset would include (as could be inferred from Explanation 8 to section 43) the amount which is paid in instalments towards the cost of acquisition of the asset (as distinguished from payment towards interest) and in view of the provisions of section 43A(1) of the Act read with section 32A(3), any increase in the liability of the assessee on account 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 ....
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....years from the expiry of the previous year in which the asset in question was installed and first put to use, as stated in sub-section (3) of section 32A of the Act. (ii) There will, however, be no change in the amount of investment allowance which the assessee would be entitled to get under section 32A of the Act on account of any fluctuation in the rate of foreign exchange 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 ....
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.... reason of fluctuation in exchange rate. The assessee claimed the following amounts for each of the years under consideration as allowable business expenditure: (1) Rs. 9,21,658, (2) Rs. 26,49,336, (3) Rs. 57,77,322. The claim of the assessee was negatived and it was held that the expenditure in question was capital in nature. The assessee preferred an alternative claim that the aforesaid 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 state....
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....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. 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 mac....
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.... the section. Section 43(1) of the Act only defines as to what is actual cost but it does not state as to what would be the effect when the said actual cost would undergo change by virtue of operation of section 43A of the Act. That section 43(1) does not deal with allowability in relation to deduction which has already been granted on the basis of actual cost worked out and thereafter there is no further 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 leg....
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....terpretation. The approach has to be therefore as stated by the Supreme Court: "8. While interpreting a statute the court should try to sustain its validity and give such meaning to the provisions which advance the object sought to be achieved by the enactment. The court cannot approach the enactment with a view to pick holes or to search for defects of drafting which make its working impossible. It is a cardinal 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 c....
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....r in which the Assessing Officer serves a notice on the assessee or immediately preceding previous year if the accounts for that year have not been made up. Section 43 deals with definition of certain terms relevant to income from profits and gains of business or profession and opens by stating "In sections 28 to 41 and in this section, unless the context otherwise requires". Clause (1) defines "actual cost" to 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 maki....
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....ion/first user will therefore have to be tested in this context. The question is as regards allowability or otherwise of investment allowance on the additional amount which goes to enhance the actual cost of the asset in question. There is no dispute that the actual cost gets enhanced for all other purposes like depreciation, etc. Therefore, the contention raised on behalf of the Revenue by giving various illustrations would not throw 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 a....
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....hat the figure of actual cost of an asset to the assessee stands modified in the previous year in which the exchange rate fluctuation took place, all other consequences would flow by adopting the said year and the said figure of the actual cost as the starting point. In other words, an assessee claiming investment allowance on such modified figure of the actual cost will be required to fulfil the requisite condition like creation of reserve 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 modi....
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....ase in liability should be taken into account to modify the figure of actual cost and secondly that such adjustment should be made in the year in which the increase or decrease in liability arises on account of the fluctuation in the rate of exchange...As we have discussed above, the provisions of sub-section (1) apply to the present case and the increased liability should be taken as 'actual cost' within the meaning of section 43A(1). All allowances including development rebate or depreciation allowance or the other types of deductions referred to in the subsection would therefore have to be based on such adjusted actual cost. But then sub-section (2) intercedes to put in a caveat. It says that the provisions of sub-section (1) should not be applied for purposes of development rebate. The effect is that the adjusted actual cost is to be taken as the actual cost for all purposes other than for grant of development rebate." Hence, once sub-section (1) of section 43A of the Act comes into play and the increase in liability is taken as the actual cost within the meaning of section 43(1) of the Act, the effect is that such adjusted actual cost has to be taken as the actual cost for ....