2000 (6) TMI 156 - AT - Income Tax

Summary

Issues: Interpretation of Section 43A of Income-tax Act, 1961

Analysis:
1. Facts of the Case: The appellant, an assessee-company, borrowed a foreign currency loan from IDBI in Japanese Yen for acquiring a CNC Chucking automatic machine. The exchange rate fluctuated, leading to an increase in the liability of the assessee, affecting the cost of the machine acquired.

2. Jurisdiction under Section 263: The CIT found excess depreciation allowed by the Assessing Officer on the increased value of the plant and machinery. The CIT assumed jurisdiction under section 263, contending that depreciation could only be claimed if the increased cost had been paid during the year under consideration.

3. Contentions of the Parties: The appellant argued that depreciation could be claimed on the increased cost of acquisition, even if the increased liability remained unpaid. The appellant relied on various decisions to support this contention.

4. Applicability of Section 43A: The ITAT Pune analyzed the language of section 43A, emphasizing the words "increase or reduction in the liability" and "for repayment of the whole or a part of the moneys borrowed," indicating that the increased liability need not be paid to claim depreciation.

5. Distinguishing Precedents: The ITAT distinguished the judgment of the Supreme Court in a previous case, stating that it was not applicable to the present case involving section 43A. The ITAT highlighted that the non obstante clause in section 43A prevails over earlier provisions.

6. High Court Decisions: The ITAT referred to decisions of various High Courts supporting the interpretation that increased liability due to exchange rate fluctuations should be considered for depreciation, even if the payment remains outstanding.

7. Conclusion: The ITAT held that section 43A applies when the liability remains outstanding at the end of the year due to exchange rate fluctuations. Therefore, the CIT's decision disallowing depreciation on increased liability was deemed unjustified, and the appeal of the assessee was allowed, quashing the order of the CIT(Appeals).