Bombay High Court
Commissioner Of Income Tax vs Reliance Industries Ltd. on 15 January, 1997
Author: Pratibha Upasani
Bench: Pratibha Upasani
JUDGMENT
By the court
1. By this application under s. 256(2) of the IT Act, 1961, the CIT seeks a direction to the Tribunal to refer four questions which the Revenue wanted the Tribunal to refer in its application under s. 256(1) of the IT Act, 1961 and the Tribunal has refused to refer the same.
2. We have heard the learned counsel for the assessee. So far as question Nos. 1, 2 and 4 are concerned, we issue Rule returnable on 5th February, 1997. So far as question No. 3 is concerned, it reads as follows :
"Whether on the facts and in the circumstances of the case, the Tribunal was right in law in allowing Rs. 37,62,427 on account of foreign exchange fluctuation incurred by the assessee in respect of foreign currency loans availed by the assessee though no payment was made during the year ?"
It is clear from the question that the grievance of the Revenue is that the Tribunal was not justified in allowing deduction for a sum of Rs. 37,62,427 on account of foreign exchange fluctuation incurred by the assessee in the year under reference as no payment had been made of the said amount during the relevant previous year. On perusal of the order of the Tribunal, we find that the Tribunal has not made any such allowance to the assessee. The amount of the loss incurred by this assessee on account of fluctuation in the foreign exchange rates was Rs. 37,62,427. The assessee had added this amount to the cost of the asset for purchase of which loan had been taken which was to be paid in foreign exchange and the loss had occurred on account of change in the rate of exchange of currency. After the acquisition of the asset, resulting in increase in the liability of the assessee in the Indian currency for making payment towards the cost of the asset, the assessee claimed development rebate and depreciation on the increased cost of the asset that is the original cost plus additional liability of Rs. 37,62,427 incurred as a result of fluctuation in the rate of exchange. The assessee alternatively claimed that it was entitled to deduction of the above amount as revenue expenditure in computation of his income.
The Tribunal added the above amount to the cost of acquisition of the asset and allowed depreciation on the increased cost as contemplated by s. 43A of the Act. The Tribunal, however, did not grant development rebate on the increased cost in view of the specific provision contained in sub-s. (2) of s. 43A of the Act. In view of the above, the Tribunal did not consider the alternate contention of the assessee for allowance of a sum of Rs. 37,62,427 on account of fluctuation in the rate of foreign exchange as revenue expenditure. The question proceeds on the basis that the Tribunal has allowed the claim of the assessee for deduction of above amount as revenue expenditure which is wholly without any basis whatsoever.
3. The learned counsel for the Revenue Dr. Balasubramanian, in the above situation fairly conceded that question No. 3 does not arise out of the order of the Tribunal. In that view of the matter, no rule is required to be issued in regard to question No. 3 as it does not arise out of the order of the Tribunal.
4. Accordingly rule in regard to question Nos. 1, 2 and 4 is returnable on 5th February, 1997.