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Union Carbide India Ltd. vs Commissioner Of Income-Tax on 28 April, 1980 cites

India Cements Ltd., Madras vs Commissioner Of Income-Tax, Madras on 8 December, 1965

12. Here also though, as I have said before, subsequent decisions had dealt with this case, the actual distinction is sought to be urged before us, whether the user of the assessee's own money or user of the borrowed money of the assessee was for capital or for revenue purpose made any difference does not seem to have been stressed. But this decision, as we shall indicate, has been later on followed. If this decision is understood in the light of the expression "when any cost or expenses incurred for obtaining a loan before it was used" then it could be treated as a capital, then the principle of this decision is absolutely irreconcilable with the observations of the Supreme Court in the case of India Cements Ltd. v. CIT [1966] 60 ITR 52.
Supreme Court of India Cites 20 - Cited by 495 - S M Sikri - Full Document

Indore Malwa United Mills Ltd., Indore vs State Of Madhya Bharat And Others on 1 October, 1964

In so holding, reliance was placed on the observations of the Supreme Court in the case of Indore Malwa United Mills Ltd. v. State of M.P. . But it has to be emphasised that it was so held in considering whether the borrowed capital become capital of the company for certain purpose. In neither of these two cases, however, the question whether a loan as such could become an asset of enduring nature or an expense for a loan either in the shape of either procuring or for the purpose of repayment of it would be capital expenditure or revenue expenditure fell for consideration. The expression that " after borrowing the money became company's money", as mentioned by the Supreme Court, in the passage quoted, was made--it must be emphasised--entirely in a different context.
Supreme Court of India Cites 5 - Cited by 38 - Full Document

S.F. Engineer And Ors. (A Firm) vs Commissioner Of Income-Tax, Bombay ... on 11 January, 1965

" In S.F. Engineer v. Commissioner of Income-tax [1965] 57 ITR 455, the Bombay High Court held that the expenditure incurred for raising loan for the carrying on of a business cannot in all cases be regarded as an expenditure of a capital nature. On the facts of the case, they held that as construction and sale of the building was the sole business of the firm and the building was its stock-in-trade, and the loan was raised and used wholly for the purpose of acquiring this stock-in-trade and not for obtaining any fixed assets or raising any initial capital or for expansion of the assessee's business, the expenditure incurred for the raising of loan was not an expenditure of capital nature but revenue expenditure. Although the conclusion of the High Court was correct, we are not able to agree with the principle that the nature of the expenditure incurred in raising a loan would depend upon the nature and purpose of the loan. A loan may be intended to be used for the purchase of raw material when it is negotiated, but the company may, after raising the loan, change its mind and spend it on securing capital assets. Is the purpose at the time 'the loan is negotiated to be taken into consideration or the purpose for which it is actually used ? Further, suppose that in the accounting year the purpose is to borrow and buy raw material but in the assessment year the company finds it unnecessary to buy raw material and spends it on capital assets. Will the Income-tax Officer decide the case with reference to what happened in the accounting year or what happened in the assessment year ?
Bombay High Court Cites 12 - Cited by 14 - Full Document

Commissioner Of Income-Tax, Bombay ... vs Tata Locomotive & Engineering Co., Ltd on 13 January, 1966

"5. We have considered the rival submissions. On the first issue whether the loss arising out of devaluation on account of loan from the Export Import Bank of Washington was an allowable deduction in computing the business income, even though a number of case law have been cited before us by both the sides, the answer to the question is self-evident from the ruling of the hon'ble Supreme Court in the case of Commissioner of Income-tax v. Tata Locomotive and Engineering Co. Ltd. . In that case, the hon'ble Supreme Court has laid down that where profit or loss arising from change in exchange rate of foreign currency was on the balance outstanding in connection with the purchase of capital goods, the profit or loss is of the nature of capital. Viewed in this context, it was not under dispute in the present case that the loan from the Export Import Bank of Washington was taken for the purchase in the USA of capital plant and machinery in the new project of petrochemical undertaking. The loan outstanding to the Export Import Bank on the devaluation date was thus for a capital purpose, i.e., purchase of capital plant and machinery in the new project of petrochemical undertaking. It follows, therefore, that if there was any profit or loss on account of devaluation in respect of this liability it was on capital account. We, therefore, following the ruling of the hon'ble Supreme Court in the case of Tata Locomotive and Engineering Co. Ltd. , which is a binding authority for us and with which we are in respectful agreement, hold that the loss arising from devaluation attributable to the Export Import Bank was of the nature of capital loss. This could not, therefore, be allowed as a deduction in computing the business profit and was rightly disallowed by the revenue authorities. We will now deal with the alternative issue raised by the assessee-company that even if the loss on devaluation was considered to be capital loss, development rebate should have been allowed on the increased liability arising out of devaluation attributable to plant and machinery installed during the previous year amounting to Rs. 1,09,24,832. Here again, it is not under dispute that out of the loan taken from the Export Import Bank payments were made to suppliers of capital plant and machinery in the USA and the plant and machinery which were installed during the previous year were those items of plant and machinery in respect of which payments had already been made by the assessee-company before the date of devaluation. This means that the actual amount which the assessee-company had to pay for the plant and machinery which was installed during the previous year was at the pre-devaluation rates and the increased liability on account of devaluation was in respect of loan taken in the USA which was outstanding on the devaluation date, and not in respect of purchase of capital plant and machinery. In these circumstances, even according to the criterion of actual cost as submitted before us by the assessee's learned counsel, Shri Rozario, the increased liability on account of devaluation will have nothing to do with what the assessee company had to pay for acquiring capital plant and/or machinery or for bringing them into working condition. No part of the increased liability on account of devaluation can, therefore, be included in the actual cost of plant or machinery which was installed during the previous year. The judgment of the Income-tax Appellate Tribunal in I.T. A, No. 2027 of 1971-72 will, therefore, not be applicable here. If resort is had to the provisions of Section 43A, Sub-section (2) of Section 43A clearly lays down that the variation in actual cost worked out under this section, will have no effect of development rebate admissible under Section 33 of the Income-tax Act, 1961. Thus, the alternative plea of the assessee also fails and the revenue authorities, in our view, were justified in not allowing development rebate on the increased liability arising out of devaluation which was debited by the assessee to the plant and machinery account on both the issues. Therefore, the appeal of the assessee-company fails."
Supreme Court of India Cites 2 - Cited by 222 - S M Sikri - Full Document

E. D. Sassoon And Company Ltd vs The Commissioner Of Income-Tax,Bombay ... on 14 May, 1954

13. Reliance was also placed on the case of Jeewanlal (1929} Ltd. v. CIT on behalf of the asseesee. There, the assessee-company had incurred an expenditure to secure overdraft facilities with the bank for the purpose of its business. It was held that the expenditure was of a revenue nature allowable under Section 10(2)(xv) of the Indian I.T. Act, 1922. It was held that the absence of any finding regarding the extent of the overdraft facility the period for which it was granted and the terms on which the overdraft facilities were secured did not affect the position.
Supreme Court of India Cites 31 - Cited by 1764 - N H Bhagwati - Full Document

Punjab Distilling Industries Ltd vs Commissioner Of Income-Tax, Punjab on 9 February, 1965

Reliance was also placed on the case of Punjab Distilling Industries Ltd. v. CIT . There, the assessee-company had been carrying on a business as distiller of country liquor and sold the produce of its distillery to licensed wholesalers. After the war started the difficulty was felt in finding the bottles in which the liquor was to be sold. To relieve the scarcity the Government devised a scheme whereby the distiller was entitled to charge the wholesaler a price for the bottles in which the liquor was supplied, at rates fixed by the Government, which they were bound to repay when the bottles were returned.. In addition to the price fixed under the Government scheme, the assessee took from the wholesalers certain further amounts described as security deposits without the Government's sanction and entirely as a condition imposed by the assessee itself for the sale of its liquor. The moneys described as security deposits were also returned as and when the bottles were returned. But in this case, the entire sum taken in one transaction was refunded when 99 per cent. of the bottles covered by it were returned. The price of the bottles received by the assessee was entered in it in its general trading account while the additional sum was entered in the general ledger under the heading "Empty bottles return security deposit account". The question was whether the assessee could be assessed to tax on the balance of the amounts of these additional sums left after the refunds made. It was held that in realising the additional amount described as security deposit the assessee was charging extra prices for the bottles. Therefore, the additional amounts taken were an integral part of the commercial transaction of the sale of liquor in bottles and when they were paid were the moneys of the assessee and remained thereafter the moneys of the assessee, they were the assessee's trading receipts and, therefore, the balance of these additional sums left after the refunds made thereout were assessable to tax.
Supreme Court of India Cites 31 - Cited by 116 - Full Document

Commissioner Of Income-Tax, Bombay vs Mogul Line Ltd., Bombay on 11 September, 1961

In the context of this case, this decision will not be of much assistance to us. Reliance was also placed on the case of CIT v. Mogul Line Ltd. [1962] 46 ITR 590 (Bom). There, it was held that the foreign fund of the assessee was allowed to remain unused where it lies the mere circumstance that there had been fluctuation in the currency resulting in appreciation of the fund in terms of the coin of another country would not result in profit to the owner of the fund. But, if the fund was utilised in the course of business for a trading purpose there would be realisation of the profit arising out of devaluation and the profit would be taxable. If, on the other hand, the fund was not utilised for a business operation or for the purposes of trade but for a common business operation like payment of income-tax in the foreign country there was no profit and the difference in exchange could not be assessed to income-
Bombay High Court Cites 4 - Cited by 32 - Full Document

Bestobell (India) Ltd. vs Commissioner Of Income-Tax on 18 September, 1978

16. Perhaps, in this light, the Division Bench of this court decided this question in the case of Bestobell (India) Ltd. v. CIT . There, what happened was that the assessee, an Indian subsidiary of a nonresident company incorporated in the United Kingdom, was engaged in executing a contract awarded by a Govt. of India undertaking. In executing the said contract, the funds of the assessee to the extent of over Rs. 24 lakhs became blocked. The assessee, therefore, approached its parent company for a loan of 37,500, being about Rs. 5 lakhs in Indian currency at that time. The foreign principal company agreed to advance the amount to the assessee and the assessoe by its letter dated January 18, 1965, sought the approval of the Reserve Bank of India for the loan of Rs. 5 lakhs ( 37,500) from the parent company with permission to repatriate the amount when required after one year or earlier if funds would become available. The permission was granted by the Reserve Bank for the loan and the assessee received the loan on February 25, 1965. The loan was not repaid at the expiry of one year and remained outstanding in the books of the assessee up to 6th June, 1966, on which date the Indian rupee was devalued. As a result of the devaluation, the assessee had to arrange for a sum of Rs. 7,87,692 to repay the original loan of 37,500, and, consequently, an extra amount of Rs. 2,87,692 was necessary to repay the original loan of Rs. 5 lakhs. After deducting a gain of about Rs. 4,078 on the assessee's sterling deposit in the London bank, the assessee debited its profit and loss account with a sum of Rs. 2,83,614 for the assessment year 1967-68, and claimed deduction of this amount. The ITO rejected the claim of the assessee on the ground that the increase of liability arising from devaluation on account of sterling loan was of a capital nature and could not be allowed as a revenue expense. On appeal, the AAC also held that the loss on account of devaluation in connection with a loan could not, under any circumstances, be considered to be revenue loss, that accretion in the amount of the borrowing was not admissible as a deduction, that the assessee not being a dealer in foreign exchange, the loss was not incidental to its business or in carrying on the same, and confirmed the disallowance of the loss. On further appeal to the Tribunal, the assessee contended that the amount should be allowed as business expenditure under Section 37(1) of the, I.T. Act, 1961, as a loss incidental to the business, that although the loan had not been repaid during the relevant year, as the assessee's accounts were kept on the mercantile system, the liability having arisen in the relevant year by reason of the devaluation, it was in the nature of an expenditure incurred by the assessee and allowable under Section 37, that the expenditure for the purpose of business included the payment of the assessee's statutory dues and taxes and that the loan had been taken by the assessee for the purpose of its business and the loss occasioned by devaluation was suffered in the business. It was held by this court that the contention of the revenue that notionally the expenditure, if any, incurred by any loss accruing to the assessee by reason of the devaluation did not arise in the year of assessment could not be accepted. The assessee maintained its accounts on mercantile basis. On devaluation of the Indian currency, the liability of the assessee immediately increased to the extent the rupee was devalued and the assessee became liable to pay and/or spend an extra amount in the rupee in order to pay its dues. The liability of the assessee arose during the assessment year and could not be said to be a contingent liability or an anticipated future loss. However, the extra expenditure, deemed or otherwise, or the loss, was inextricably connected with the assessee's indebtedness and did not arise de liors the indebtedness. Therefore, the extra amount which the assessee had to provide for as a result of devaluation cannot be considered as extra expenditure to be incurred for meeting the debt like postal expenses or bank charges or as extra expenditure resulting in a business loss of a revenue nature. If there was a devaluation in favour of the rupee as a result of which the assessee had to pay less to its creditors, the surplus arising would have been of capital nature and could not have been assessed in the hands of the assessee as a business profit. Conversely, as a result of the exchange rate going against the assessee, the loss which the assessee incurred cannot be held to be a revenue loss. In that case, it was not the contention of the assessee that it had incurred the extra expenditure in order to secure the loan. The loan had already been obtained. It was at the point of repayment that the assessee had to provide an extra amount in rupees by reason of the devaluation. Hence, it was not expenditure incurred for securing the use of money for a certain period which could be treated as revenue expenditure. Therefore, the Tribunal was right in holding that the amount of Rs. 2,83,614 was not deductible in computing the assessee's profits and gains of business. There the Tribunal was also right in holding that the amount of Rs. 2,83,614 was not deductible in computing the chargeable profits for the purposes of the surtax assessment for the assessment year 1967-68. There the two questions with which the court was concerned were as follows ;
Calcutta High Court Cites 21 - Cited by 28 - Full Document

The South India Corporation(P) Ltd vs The Secretary, Board Of ... on 13 August, 1963

22. Basing on the aforesaid notes, on behalf of the revenue, it was contended mainly that the purpose of Section 43A was to deal with all devaluation cases. Therefore, any appreciation or depreciation in value of assets, as a result of devaluation in profit or loss arising therefrom, must be governed by the special provisions of Section 43A. A special provision has been made that this is the only provision to guide the matter. Before we deal with that aspect of the matter, we must refer to Section 43(a) which uses a non obstante clause. The Supreme Court had observed in the case of South India Corporation (P.) Ltd. v. Secretary, Board of Revenue , explaining the purpose of such a clause at page 215 dealing with Article 372 of the Constitution of India (p. 89 of 15 STC):
Supreme Court of India Cites 28 - Cited by 254 - Full Document

Challapalli Sugar Ltd vs The Commissioner Of Income Tax, A.P. ... on 31 October, 1974

In the case of Challapalli Sugars Ltd. v. CIT [1975] 98 ITR 167 the Supreme Court had the occasion to deal with the expression "actual cost". There the Supreme Court had observed that interest paid before the commencement of production on amounts borrowed by the assessee for the acquisition and installation of plant and machinery forms part of the " actual cost" of the assets to the assessee within the meaning of the expression in Section 10(5) of the Indian I.T. Act, 1922, and the assessee will be entitled to depreciation allowance and development rebate with reference to such interest also. As the expression "actual cost" had not been defined, it should be construed in the sense which no commercial man would misunderstand. For this purpose, it should be necessary to ascertain the connotation of the expression in accordance with the normal rules of accountancy prevailing in commerce and industry. The accepted accountancy rule for determining cost of fixed assets was to include all expenditure necessary to bring such assets into existence and to put them in working condition. In case money was borrowed by a newly started company which was in the process of constructing and erecting its plant, the interest incurred before the commencement of production on such borrowed money could be capitalised and added to the cost of the fixed assets created as a result of such exenditure.
Supreme Court of India Cites 28 - Cited by 416 - H R Khanna - Full Document
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