ASHOK TEXTILES LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE income-tax referred case is at the instance of the assessee, arising out of the appellate order in I. T. A. No. 330 (Coch) of 1979. THE question referred is :

(2.) THE assessee had purchased certain machinery from C. Itch & Co. Ltd., Osaka, on a deferred payment scheme. On account of fluctuations in the exchange rate, the assessee had to pay during the relevant assessment year more in terms of rupees than was originally contemplated under the agreement as the payment happened to be made under the agreement in terms of Yen. Such excess payment made in the accounting year amounted to Rs. 15,369.84. This was claimed as revenue expenditure. THE Income-tax Officer disallowed it as capital expenditure. On appeal, the Commissioner of Income-tax (Appeals) held that the claim of the assessee should be considered under Section 43A. He did not accept the contention of the assessee that the term "rate of exchange" occurring in Section 43A meant the rate of exchange determined by the Government and not difference in fluctuations in exchange rates owing to fluctuations of currencies. THE appellate authority was of the view that fluctuations in exchange rates due to fluctuation of currencies should be considered to be the "rate of exchange recognised" by the Government also appearing in Section 43A. On second appeal, the Tribunal upheld the view of the lower authorities. THE Appellate Tribunal followed the decision of the Madras High Court in CIT v. South India Viscose Ltd. [1979] 120 ITR 451 (Mad) and pointed out that the extra amount similar to the amounts paid by the assessee had been considered to be a capital expenditure in that decision. It is thereafter, at the instance of the assessee, that the Appellate Tribunal referred the above question of law raised for the decision of this court under Section 256(1) of the Income-tax Act.

(3.) IN the light of the above, we answer the question in the affirmative, i.e., in favour of the Revenue and against the assessee.