9911796707
TMI Blog1985 (9) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... ril 22, 1966, the assessee contracted with Lurgi Gesellschaff Fur Chemie and Hutternesen MBH, Frankfurt, Germany, to purchase an iron ore pelletizing plant. The agreement set out that the price of DM 15,991,000 would be the aggregate payable in respect of the various component parts of the plant. The price was F.O.B. a North Sea port. The payment was to be made thus 10% upon the signing of the agreement, 10% by an irrevocable letter of credit and the balance 80% in equal half-yearly instalments, the first of which was to be payable six months after the final delivery. Interest was payable upon the balance 80% of the purchase price. Delivery was to commence ten months after the coming into effect of the agreement and was to be completed with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Act, 1961. After hearing the assessee, he concluded that the acquisition of the plant was complete when the contractual obligations were crystallised on April 22, 1964, and that, therefore, the assessee had acquired the plant before the devaluation date and not thereafter. In exercise of the powers conferred under section 263, he set aside the assessment. The assessee appealed to the Income-tax Appellate Tribunal. The Tribunal noted the facts and the arguments that were addressed to it. Having regard to the decision of the Supreme Court in CIT v. Mir Mohammad Ali [1964] 53 ITR 165, the Tribunal held that the component parts of the plant for which prices were fixed under the agreement constituted separate assets. The Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset, there is an increase or reduction in the liability of the assessee as expressed in Indian currency for making payment towards the whole or a part of the cost of the asset or for repayment of the whole or a part of the moneys borrowed by him from any person, directly or indirectly, in any foreign currency specifically for the purpose of acquiring the asset (being in either case the liability existing immediately before the date on which the change in the rate of exchange takes effect), the amount by which the liability aforesaid is so increased or reduced during the previous year 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... future date at the rate of exchange specified in the contract to enable him to meet the whole or any part of the liability aforesaid, the amount, if any, to be added to, or deducted from, 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 under this sub-section shall, in respect of so much of the sum specified in the contract as is available for discharging the liability aforesaid, be computed with reference to the rate of exchange specified therein. (2) The provisions of sub-section (1) shall not be taken into account in computing the actual cost of an asset for the purpose of the deduction on account of development rebate under section 33." M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch liability, in the circumstances stated in the earlier paragraph will not, however, be taken into account in computing the actual cost of the asset for the purpose of deduction on account of development rebate. " Our attention was drawn by Mr. Dhanuka to the decision of the Madras High Court in South India Shipping Corporation Ltd. v. Addl. CIT [1979] 116 ITR 819. A Division Bench of the Madras High Court was dealing with the question whether, on the facts and in the circumstances of that case, the Tribunal was right in holding that, in computing the actual cost for the purpose of calculating development rebate under section 33 of the Income-tax Act, 1961, no upward adjustment of the amount which the assessee had to bear as a result of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to development rebate on the increased price payable on the asset as a result of fluctuation in the exchange rate on devaluation. It was held that the effect of sub-section (2) of section 43A was to exclude the applicability of subsection (1) thereof for the computation of the actual cost for the purpose of deduction on account of development rebate under section 33. Therefore, for the purposes of computing the actual cost of an asset for the purpose of deduction on account of development rebate under section 33, the only statutory provision relevant was section 43(1) defining the expression " actual cost ". We may also note the decision of the Calcutta High Court in Union Carbide India Ltd. v. CIT [1981] 130 ITR 351. The view taken by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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