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TMI Blog2000 (6) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... vant exchange rate was Rupee I against Japanese Yen 8.34. Accordingly, there was an increase in the liability of the assessee in respect of the outstanding amount to be paid by the assessee against IDBI loan. Accordingly, the cost of machine acquired by the assessee was increased in pursuance of additional liability by invoking the provision of section 43A and depreciation was claimed on the enhanced cost of acquisition. The same was allowed to the assessee by the Assessing Officer in the regular assessment proceedings under section 143(3). 3. The assessment report was examined by the CIT, Pune and found that excess depreciation of Rs. 1,75,144 had been allowed by the Assessing Officer on the increased value of the plant and machinery pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It has been submitted by him that judgment of Bombay High Court relied on by the assessee before the CIT, does not lay down any proposition that depreciation is to be allowed only where the increased liability was actually paid. In addition, he has also relied on the following decisions in support of the contention :--- 1. New India Industries Ltd v. CIT [1993] 203 ITR 933 (Guj.). 2. Garden Silk Mills Ltd. v. CIT [1996] 221 ITR 861 (Guj.). 3. Padamjee Pulp Paper Mills Ltd. v. CIT [1994] 210 ITR 97 (Bom.). 4. CIT v. Tata Hydro Electric Supply Co. Ltd. [1996] 219 ITR 178 (Bom.). 5. CIT v. Motor Industries Co. (No. 1) [1998] 229 ITR 126 (Kar.). 6. CIT v. Arvind Mills Ltd. [1992] 193 ITR 255 (SC). 7. Dempo Steamships Ltd. v. Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be added to, or, as the case may be, deducted from, the actual cost of the asset as defined in clause (1) of section 43 or the amount of expenditure of a capital nature referred to (in clause (iv) of sub-section (1) of section 35 or in section 35A) or in clause (ix) of sub-section (1) of section 36, or, in the case of a capital asset (not being a capital asset referred to in section 50), the cost of acquisition thereof for the purposes of section 48, and the amount arrived at after such addition or deduction shall be taken to be the actual cost of the asset or the amount of expenditure of a capital nature or, as the case may be, the cost of acquisition of the capital asset as aforesaid." A bare reading of the aforesaid provision cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, prior to insertion of section 43A, it was held by the court that once the cost of the acquisition was determined, the same could not be changed on account of fluctuation in the rate of foreign exchange. Accordingly, that judgment does not help the Revenue. This aspect of the matter has rather been considered by the Apex Court in the case of Arvind Mills Ltd. It has been held therein that the non obstante clause with which the section begins indeed makes it clear that if the position had been different otherwise, it cannot prevail after introduction of this section. 7. The view which we have taken is rather fortified by the various decisions of High Courts relied upon by the learned counsel for the assessee. The Hon'ble Bombay High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual payment. Therefore, in our opinion, the CIT was not justified in interpreting the aforesaid observations in the, manner it did. 8. Further, the view taken by CIT cannot be accepted in view of the later judgment of the Bombay High Court in the case of Padamjee Pulp Paper Mills Ltd. In this case, the Tribunal had refused to allow the capitalisation of loss on account of exchange fluctuation in respect of the outstanding amount of loan which did not fall due in the relevant asstt. years on the ground that the additional liability in respect of the outstanding loan was only notional and therefore, could not form part of actual cost of the asset for the purpose of depreciation. On reference to High Court, it was held that additional l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et or of the loan in foreign currency, is outstanding as on the date on which there is a change in the rate of exchange of currency. In such a case where in consequence of the change in the rate of exchange of currency, there is an increase or reduction in the assessee's liability as expressed in Indian currency for payment of the whole or a part of the cost of the asset or of the loan-in foreign currency, the original actual cost, to the assessee, of the machinery or plant or other capital asset, is required to be increased or, as the case may be, reduced, correspondingly ....." 11. The Karnataka High Court in the case of CIT v. Motor Industries Co. Ltd (No. 2) [1998] 229 ITR 137 has also taken the same view after taking into considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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