COMMISSIONER OF INCOME TAX Vs. INDIA PISTONS LIMITED

JUDGEMENT

(1.) The above tax case appeal is directed against the order of the Income-tax Appellate Tribunal in ITA No. 107/Mds/1993 dated 24.10.2000, raising the following substantial question of law.

(2.) The revenue is the appellant. The assessment year involved in this appeal is 1989-90. The assessee is a company. The assessee filed its return for assessment year 1989-90 on 29.12.1989 returning an income of Rs. 16,33,760/-. The Assessing Officer accepted the same and sent an intimation under Section 143(1)(a) of the Act to the assessee. As some mistake was noticed by the Assessing Officer, he has passed an order under Section 154 after giving an opportunity to the assessee, whereby the taxable income of the assessee was increased to Rs. 18,11,810/-. On appeal at the instance of the assessee, the Commissioner of Income-tax (Appeals) allowed the appeal deleting the addition made by the Assessing Officer under Section 154 of the Act. On further appeal by the revenue, the Income Tax Appellate Tribunal confirmed the order of the Commissioner of Income-tax (Appeals). Hence, the present appeal raising the substantial question of law referred supra.

(3.) A bare reading of Explanation 8 to Section 43(1) of the Income-tax Act, 1961, inserted with effect from April 1, 1974, shows that it was added with the object of removing doubts with regard to the includibility of interest relatable to any period after the asset has first been put to use, in the computation of its actual cost. By this Explanation, it has been declared by Parliament that "where any amount is paid or is payable as interest" in connection with the acquisition of an asset "so much of such amount as is relatable to any period after such asset is first put to use shall not be included and shall be deemed never to have been included," in the actual cost of such assets. Parliament, in the above Explanation, has taken full care to couch the Explanation in the widest possible terms to avoid any further controversy in regard to the very same issue on the basis of the manner of payment of interest or time of payment thereof. This has been done by the use of the expression "where any amount is paid or is payable as interest". It will not be correct to say that the legal position in regard to includibility of interest on deferred payment in the computation of the actual cost of an asset did not undergo any change as a result of the insertion of Explanation 8 with retrospective effect and the specific declaration by Parliament made therein that the part of the interest mentioned therein would not be includible in the actual cost. The very purpose of this amendment was to clarify the position in this regard and to set at rest the controversy that had arisen, vide CIT v. Rajaram Bandekar, 1993 202 ITR 514 Bombay High Court.