SYNBIOTICS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Tribunal, Ahmedabad Bench 'A', has referred the following questions for the opinion of this Court:

(2.) THE Revenue has also preferred reference application against the order of the Tribunal and at the instance of the Revenue, following question was referred to this Court for our opinion :

(3.) AS far as the question No. 2 is concerned, the Tribunal has relied on the decision in the assessee's own case for the asst. year 1977 78 and disallowed the claim of the assessee to the extent of Rs. 26,924 in respect of exchange loss. This issue is squarely covered by the decision of the Supreme Court in the case of CIT vs. Tata Iron & Steel Co. Ltd. (1998) 150 CTR (SC) 209 : (1998) 231 ITR 285 (SC) : TC S29.2996 wherein it is held that at the time of repayment of loan, there was a fluctuation in the rate of foreign exchange as a result of which, the assessee had to repay a much lesser amount than he would have otherwise paid. It was further held that this was not a factor which could alter the cost incurred by the assessee for purchase of the asset. The assessee might have raised the funds to purchase the asset by borrowing but what the assessee had paid for it, was the price of the asset. That price could not change by any event subsequent to the acquisition of the asset. The manner or mode of repayment of the loan had nothing to do with the cost of an asset acquired by the assessee for the purpose of his business. Following this decision, we hold that the assessee is not entitled to claim the exchange loss of Rs. 26,924 as revenue expenditure. Accordingly, the question No. 2 is answered in the affirmative, in favour of the Revenue and against the assessee.