TaxTMI 
TaxTMI 
2019 (5) TMI 33
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....t the instance of the assessee, challenging the verdict passed by the Income Tax Appellate Tribunal based on the finding given by the Special Bench on the question as to whether the gains earned on cancellation of the foreign exchange forward contract are 'capital receipts' or 'revenue receipts' and if it is capital receipt, whether the same could be reduced from the cost of plant and machinery in connection with which forward contracts were entered into. There is an incidental question as well. 2. The assessee is engaged in the manufacture and sale of automotive tyres and tubes having two plants; one at Baroda in Gujarat and the other one at Perambra in Kerala. In respect of the assessment year 1993 - '94 [in relatio....
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...., no substantial question of law is seen framed. The assessee however has suggested two questions, as involving substantial questions of law, which are extracted below : "1. Whether on the facts and circumstances of the case, the gains on the cancellation of forward contracts, held to be capital receipt, were liable to be set off against the cost of acquisition of imported plant and machinery ? 2. Whether the royalty expenses of Rs. 49 lakhs could be disallowed as not relation to the previous year ended 31.03.1993 relevant to the assessment year 1993 - 94" 5. We heard Sri. Joseph Markos, the learned senior counsel appearing for the appellant and Sri.Christopher Abraham, the learned standing counsel appearing for the Rev....
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....s specified in the contract. Any increase or reduction in the liability being the difference in the Rupee equivalent of original liability as well as the liability on the basis of the forward contract would be capitalized towards the actual cost of the assessee in consonance with the provisions of section 43A. Thus, gains arising on cancelling of the forward contracts in the case of the assessee represent the reduction of the liability for repayment of the foreign loan which is liable to be adjusted in the cost of the asset as per section 43A (1). We are not persuaded to accept the argument of the Id. Counsel for the assessee that the forward contracts have been cancelled by the assessee and are not covered under Explanation 3 to Section 43....
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....payment of the liability. We are unable to accept the interpretation suggested by the Id. Counsel which in fact would cause grave violence to the language of the provision. Any such interpretation would be contrary to well-accepted principles of interpretation, namely, rule of literal interpretation as well as rule of purposive interpretation. It is an elementary principle of interpretation of statutes, reiterated by Courts time and again that the Court cannot read anything into a statutory provision which is plain and unambiguous. In our consideration opinion, the gain arising from cancellation of forward contracts which are connected with the foreign loans raised for purchase of machinery are capital in nature and are liable to be capital....
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....assessee is entitled to adjust the actual cost of imported assets acquired in foreign currency on account of fluctuation in the rate of exchange at each balance-sheet date, pending actual payment of the varied liability with reference to unamended Section 43A of the Act, in Woodward's case [2009] 312 ITR 254, the court observed thus (page 272 ) : "........ What triggers the adjustment in the actual cost of the assets, in terms of the unamended section 43A of the 1961 Act is the change in the rate of exchange subsequent to the acquisition of asset 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 a....
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....ng adjustment in the carrying amount of the fixed asset. 16. We are of the opinion that the decision of this court in Woodward's case [2009] 312 ITR 254 settles the second issue as well. We respectfully concur with the same and hold that all the assessment years in question being prior to the amendment in section 43A of the Act with effect from April 1., 2003 the assessee would be entitled to adjust the actual cost of the imported capital assets acquired in foreign currency, on account of fluctuation in the rate of exchange at each of the relevant balance-sheet dates pending actual payment of the varied liability? We are of the view that the idea and understanding of the assessee as to the scope of the provision is thoroughly wr....