Important Point
Since section 43(A)(1) of Income Tax Act, 1961 relates to fluctuations of foreign exchange and it effects on valuation of assets, it has nothing to do with question as to whether it is allowable in one year.

Headnote:Income Tax Act, 1961 – Section 32A, 43A(1) – Investment allowance – Allowability of – Assessing officer held that investment allowance is only to be allowed in one assessment year and not several assessment years – Tribunal and High Court proceeded on basis that in view of section 43A(1), allowance was to be granted in different assessment years – High Court dismissed Tax case Appeals on ground that case at hand was covered against revenue in view of order passed earlier by High Court in Southern Asbestos cement Ltd. vs. Commissioner of income tax – Appeals there against – Plea of appellant that since section 43(A)(1) related to fluctuations of foreign exchange and it effects on valuation of assets, it had nothing to do with question as to whether it was allowable in one year and therefore decisions relied upon by High Court had no application – Since Respondent also fairly accepted said position – Hence in that view of matter, impugned order of High Court set aside and matter remitted back for fresh adjudication after formulating question of law involved – Appeals allowed in part.(Paras 5 to 8)
       Facts of the case:-
       1.The core issue in present case was regarding allowability of investment allowance under Section 32A of the Income Tax Act, 1961.
       Findings of the Court:-
       The Court held that Assessing officer observed that investment allowance was only to be allowed in one assessment year and not several assessment years. Tribunal and High Court proceeded on basis that in view of section 43A(1), allowance was to be granted in different assessment years. High Court dismissed Tax case Appeals on ground that case at hand was covered against revenue in view of order passed earlier by High Court in Southern Asbestos cement Ltd. vs. Commissioner of income tax. In appeals there against, plea of appellant was that since section 43(A)(1) related to fluctuations of foreign exchange and it effects on valuation of assets, it had nothing to do with question as to whether it was allowable in one year and therefore decisions relied upon by High Court had no application. Since Respondent also fairly accepted said position. Hence in that view of matter, impugned order of High Court was set aside and matter was remitted back for fresh adjudication after formulating question of law involved. Appeals allowed in part.
       Result : Appeals allowed in part.

JUDGMENT

Dr. Arijit Pasayat, J. —

1.Leave granted.

2.Challenge in these appeals is to the order passed by a Division Bench of the Madras High Court dismissing the Tax Case Appeals as according to the High Court the case at hand is covered against the revenue in view of the order passed earlier by the High Court in Southern Asbestos Cement Ltd. v. Commissioner of Income Tax (259 I.T.R. 631).

3.These appeals relate to assessment years 1989-90, 1991-92 and 1992-93. The core issue is the allowability of investment allowance under Section 32A of the Income Tax Act, 1961 (in short the Act). The assessing officer was of the view that it is only to be allowed in one assessment year and not several assessment years. The Tribunal and the High Court appear to have proceeded on the basis that in view of Section 43A(1) of the Act the allowance was to be granted in different assessment years.

4.Sections 32A and 43A(1) of the Act read as under:

Section 32A- INVESTMENT ALLOWANCE.

(1)In respect of a ship or an aircraft or machinery or plant specified in sub-section (2), which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction, in respect of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed or, if the ship, aircraft, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, of a sum by way of investment allowance equal to twenty-five per cent. of the actual cost of the ship, aircraft, machinery or plant to the assessee:

Provided that in respect of a ship or an aircraft or machinery or plant specified in sub-section (8B), this sub-section shall have effect as if for the words “twenty-five per cent”, the words “twenty per cent” had been substituted:

Provided further that no deduction shall be allowed under this section in respect of

(a)Any machinery or plant installed in any office premises or any residential accommodation, including any accommodation in the nature of a guest-house;

(b)Any office appliances or road transport vehicles;

(c)Any ship, machinery or plant in respect of which the deduction by way of development rebate is allowable under section 33; and

(d)Any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any one previous year.

Explanation : For the purposes of this sub-section, “actual cost” means the actual cost of the ship, aircraft, machinery or plant to the assessee as reduced by that part of such cost which has been met out of the amount released to the assessee under sub-section (6) of section 32AB.

(2)The ship or aircraft or machinery or plant referred to in sub-section (1) shall be the following, namely:-

(a)A new ship or new aircraft acquired after the 31st day of March, 1976, by an assessee engaged in the business of operation of ships or aircraft;

(b)Any new machinery or plant installed after the 31st day of March, 1976 -

(i)For the purposes of business of generation or distribution of electricity or any other form of power; or

(ii)454 in a small-scale industrial undertaking for the purposes of business of manufacture or production of any article or thing; or

(iii)In any other industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule:

Provided that nothing contained in clauses (a) and (b) shall apply in relation to, -

(i)A new ship or new aircraft acquired, or

(ii)Any new machinery or plant installed, after the 31st day of March, 1987 but before the 1st day of April, 1988, unless such ship or aircraft is acquired or such machinery or plant is installed in

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2007 Supreme(SC) 1629

2007(8) Supreme 386Supreme Court of indiaDr. Arijit Pasayat & P. Sathasivam,JJCommissioner of Income Tax, Madras — PetitionerVersusM/s Lucas T.V.S. Ltd. Padi Chennai — RespondentsAppeal (civil) 5950-5952 of 2007Decided on 14/12/2007

Important PointSince section 43(A)(1) of Income Tax Act, 1961 relates to fluctuations of foreign exchange and it effects on valuation of assets, it has nothing to do with question as to whether it is allowable in one year.

2007(8) Supreme 386
Supreme Court of india
Dr. Arijit Pasayat & P. Sathasivam,JJ
Commissioner of Income Tax, Madras — Petitioner
Versus
M/s Lucas T.V.S. Ltd. Padi Chennai — Respondents
Appeal (civil) 5950-5952 of 2007
Decided on 14/12/2007

Important Point
Since section 43(A)(1) of Income Tax Act, 1961 relates to fluctuations of foreign exchange and it effects on valuation of assets, it has nothing to do with question as to whether it is allowable in one year.