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TMI Blog1991 (1) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in upholding the Commissioner of Income-tax (Appeals') order who directed the Income-tax Officer to make adjustment for relief allowed in the income-tax assessment ?" It is admitted by both sides that the answer to the second question depends upon the answer to the first question and if the answer to the first question is against the Revenue, the second question will also have to be answered against the Revenue. The assessee obtained a long-term loan from the Industrial Credit and Investment Corporation of India and claimed the benefit for the assessment years 1975-76 and 1976-77. The borrowing was for the purchase of machinery by i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal affirmed the order of the Commissioner of Appeals. Hence, these references at the instance of the Revenue. Mr. Chandrakumar, learned counsel for the Revenue, referred to the Second Schedule to the Act wherein the rules for computing the capital of a company for the purpose of surtax are found. Clause (v) of rule 1 reads thus: " (1) Subject to the other provisions contained in this Schedule, the capital of a company shall be the aggregate of the amounts, as on the first day of the previous year relevant to the assessment year, of ... (i) to (iv) omitted as unnecessary. (v) any moneys borrowed by it from Government or the Industrial Finance Corporation of India or the Industrial Credit and Investment Corporation of India o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company, when computed in Indian currency, will have to be arrived at by applying the existing foreign exchange rate as on the relevant date. Any other interpretation will lead to an absurd result. For example, if the borrowing is held to be crystallised in Indian currency, the repayment made by the company in the course of 4 or 5 years may wipe out the said outstanding in Indian rupee, though, in reality, the company still owes the foreign creditor. The view we have expressed above also finds support from a decision of the Bombay High Court in CIT v. National Rayon Corporation Ltd. [1986] 160 ITR 723. In the said case, the Bombay High Court accepted the claim of the assessee that the assessee was entitled to add on the liability i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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