9911796707
TMI Blog1985 (10) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... wer Co. Ltd. and References Nos. 287D and 287E of 1975 relate to Andhra Valley Power Supply Co. Ltd. As the references arise on a common statement of the case and the question referred to us for our determination is the same, we propose to dispose of these references by this common judgment. The three assessees are companies doing the business of generation and supply of electric power to consumers. They belong to the Tata group of companies. The assessee companies undertook the erection of a thermal power-station at Trombay and the erection of that power station was completed during the previous years relevant to the assessment years 1958-59 and 1959-60, respectively. For the purpose of purchase of the machinery required for the setting u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessees to depreciation on the increased liability reduced as aforesaid. The Additional Commissioner of Income-tax, however, called for and examined the records of the assessee companies. He took the view that the assessment orders passed by the Income-tax Officer allowing depreciation on the basis of the increased liability on account of revaluation of the German and Dutch currencies as aforesaid was erroneous and prejudicial to the interests of the Revenue inasmuch as, according to him, under section 43A of the Income-tax Act, 1961, the adjustment for increased liability could be allowed only if the aforesaid liability was increased or decreased during the relevant previous year in consequence of a change in the rate of exchange. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been acquired after April 1, 1967. The third and the last submission of Mr.Jetly was that, in any event, in the present case, the assessees were not entitled to the benefit of the provisions of section 43A, because they had not capitalised their increased liability on account of revaluation of German Marks and Dutch Guilders. In order to appreciate the submission of Mr. Jetly, it is necessary to bear in mind the provisions of section 43A of the Income-tax Act, 1961. The relevant provisions of that section read thus: " Notwithstanding anything contained in any other provision of this Act, where an assessee has acquired any asset from a country outside India for the purposes of his business or profession and, in consequence of a change ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of section 43A were not retrospective but were merely prospective, that is, they came into effect from April 1, 1967, and he stated that his first two submissions were based on the prospective nature of section 43A. We agree, and there is no controversy before us in that regard, that the provisions of section 43A are prospective. What is important, however, is to consider what is the sense in which the provisions of this section are prospective. In our view, on a plain reading of the relevant portion of section 43 A, it makes it clear that all that is meant by saying section 43A is prospective is that the variation in the actual cost provided under section 43A will be applicable only where depreciation has to be calculated in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titute a capital asset. If there is an increase in the liability in respect of the actual cost of that machinery, that increase must necessarily relate to the capital asset and we fail to see what difference it makes whether the assessee shows the value of the capital asset as having increased on account of increased liability in the balance-sheet or does not do so. As we have pointed out, section 43A of the Income-tax Act, 1961, only deals with the effect of a change in the rate of exchange with the foreign currency concerned in determining the " actual cost " referred to in section 43 and there is nothing in the language of section 43 to indicate that the actual cost has anything to do with the cost of the asset in question being capitali ..... X X X X Extracts X X X X X X X X Extracts X X X X
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