COMMISSIONER OF INCOME TAX Vs. COCHIN REFINERIES LIMITED

JUDGEMENT

(1.) THIS court, at the instance of the Revenue, directed the Income-tax Appellate Tribunal, Cochin Bench, to refer seven questions of law. The questions referred to us by the Tribunal are :

(2.) THE assessee is a Government-owned company carrying on the business of refining crude oil. THE assessment year in question is 1968-69 relevant to the accounting year ending August 31, 1967. THE assessee Submitted a nil return. THE Income-tax Officer completed the assessment by determining the income at Rs. 94.39 lakhs and finding that the assessee was entitled to development rebate of more than Rs. 5 crores, the Officer adjusted the income against the said development rebate and unabsorbed development rebate of Rs. 4.92 crores. THE assessee appealed against that order. THE Income-tax Officer, in the meantime, reopened the assessment under Section 147(b) of the Income-tax Act, 1961, on the ground that the assessee had been granted excess depreciation allowance. In the reassessment order dated March 11, 1974, the Officer deducted the excess depreciation and development rebate. On March 18, 1974, the Appellate Assistant Commissioner disposed of the assessee's appeal against the original order of assessment by granting certain reliefs. Both the assessee and the Revenue appealed against that order before the Tribunal. In the meantime, the Appellate Assistant Commissioner, disposing of the appeal against the reassessment order, granted certain reliefs and rejected some of the reliefs sought. THE assessee alone challenged that order before the Tribunal. Thus, there were three appeals before the Tribunal and all of them were disposed of by it by a common order from which the questions referred to us arise.

(3.) IT is not in doubt that the loans were raised for the purchase of machinery, spare parts and other articles forming part of the plant which was being set up by the assessee. The loan was thus utilised for acquisition of capital assets and its repayment was, therefore, a capital expenditure. We are accordingly of the view that what was paid or what had become payable by the assessee in excess of the original rates, owing to devaluation or fluctuation in the value of currency, was payment for the acquisition of capital assets and was, therefore, capital expenditure. In an identical situation, a similar view was expressed by the Calcutta High Court in Union Carbide India Ltd. v. CIT [1981] 130 ITR 351 and Bestobell India Ltd. v. CIT, 1979 117 ITR 789. With respect we adopt that view. Accordingly, we answer questions Nos. 1 and 2 in the negative, that is, in favour of the Revenue and against the assessee.