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TMI Blog2003 (12) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... s not been able to establish as to how such payments were incidental to the business." 6. While completing the assessment Assessing Officer disallowed Rs. 44,200 on account of donation observing that donations were inadmissible. In appeal CIT (A) deleted the same accepting the donation of the assessee that the assessee was required to incur expenditure under donations and subscriptions in normal course of running of his business and expenditure was allowed fully and exclusively for the purpose of business. Aggrieved with the finding of the CIT (A) revenue is now in appeal before us on this ground. 7. Ld. Departmental Representative before us strongly opposed the finding of the CIT (A) and submitted that CIT (A) has accepted the contention of the assessee without apprising the fact that the assessee had failed to prove that the expenses were incidental to business. On the other hand ld. Counsel for the assessee submitted that donations and subscriptions were made during the course of regular business of the assessee. He also submitted that the same has been proved by the assessee before the CIT (A) and has established that donations were meant and made in the course of running the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tenable because the Assessing Officer disallowed such expenses on the basis of nature of expenditure booked under sales promotion expenses. He also submitted examples of such expenditure observed by the Assessing Officer which are being reproduced here: Rs. "1. CV050012, dated 4-5-1989 Expenditure to entertain Brig. S. Mohapatra and family Dehradun 1308 2. JV-060039 dated 27-6-1989 Presentation in the wedding of Mr. A. Agarwal 1934 3. J-277 dated 31-3-1990 Paid to Jamanlal Indrajit 53,086 4. Admitted entertainment expenses shown under the head miscellaneous expenses 10,639.94 5. JV-039 dated 15-1-1990 Amount paid to Chief Engineering office 1,500 Besides many items were not supported by vouchers Hence not amenable to verification. For example JV-087 dated 31-1-1990 expenses incurred by AK Singh 64,427.90 6. J-5 dated 6-3-1990 Incurred by Calcutta Bench 59,906.76 (No further details produced) The above list is not exhaustive but only illustrative." 12. Ld. DR also opposed the contention of the CIT (A) that no disallowance can be made under sales promotion expenditure treating it as entertainment expenditure because the same has already been d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nery against which investment allowance was sought for had been installed during the assessment year 1989-90 and therefore the Assessing Officer held that no investment allowance can be allowed on the foreign exchange fluctuation capitalized during this year. He also rejected the plea of the assessee that according to section 43A amount of exchange fluctuation should be added to the cost of assets and held that the cost of assets is only increased for the purpose of calculation of depreciation and since section 43A does not speak of investment allowance and going by the provisions of section 32A conditions are not satisfied and based on above finding. Assessing Officer rejected the claim of investment allowance on the exchange fluctuation of Rs. 64,01,426. 20. In appeal ld. AR of the assessee submitted before the CIT (A) that section 43A stares with a non obstante clause and therefore it supersedes that portion of section 32A which speaks of allowing the relief in respect of either of the two years and therefore allowance under section 43A can be allowed in a year other than two years stated in section 32A(1). He also submitted that section 43A emphasises sections 32A and 43A will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t this decision applies to the case where the incremental cost arises beyond the period mentioned in section 32A. He also cited the decision of Southern Asbestos Cement Ltd. v. Dy. CIT [1991] 38 ITD 449 (Mad.) which held that the assessee was entitled to investment allowance of increase in cost of machinery occasioned by fluctuation in foreign exchange rate in assessment year in which incremental cost arose provided the assessee had created a suitable reserve for this purpose. Therefore ld. Counsel for the assessee submitted that the claim of the assessee deserves to be allowed on a bare reading of section 43A and in the context of case law cited above. 22. On the other hand ld. DR strongly supported the finding of the CIT (A) and submitted that the above investment allowance has been claimed on the basis of addition to the plant and machinery not on physical basis but on account of fluctuation of foreign exchange which had been capitalized by the assessee during the year. He also argued that investment allowance under section 32A is admissible only in respect of plant and machinery in the year in which it was acquired or year of installation or year in which first put to use. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act, 1961 in respect of additional cost of imported items which had taken place because fluctuation in the rate of exchange in the year subsequent to the year of acquisition. He also relied on the order of Hon'ble Gujarat High Court in the case of CIT v. Windsor Foods Ltd. [1999] 235 ITR 249. 25. We have heard both the parties and have considered the rival submissions made before us and have gone through the written submissions of both the ld. Counsel for the assessee and the DR. 26. In this case it is a fact that the assessee has incurred an additional liability on account of machinery purchased by the assessee from a foreign dealer but the main point here arises that whether the assessee is entitled to investment allowance on the additional liability arisen due to fluctuation in foreign exchange rate in respect of payment of outstanding instalment of machinery. We have carefully considered the submissions made by the ld. AR making emphasis on section 43A in support of his arguments. We have also considered case laws cited by the ld. Counsel for the assessee. As far as the decision of Hon'ble Patna High Court is concerned the facts are not the same to the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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