AHMEDABAD KAISER-I-HIND MILLS CO.LTD. vs. COMMISSIONER OF INCOME TAX

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ITR/166/1989HC GujaratGJHC24012946198920 November 2002Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE K.M.MEHTA3 pages
AI SummaryAllowed

What did the High Court hold?

The High Court answered the question in the affirmative, in favour of the assessee and against the revenue. The reasoning was based on the majority view of the Full Bench of the same court in the case of CIT v. GSFC (I.T.R. No. 178/85). The principle established is that an assessee is entitled to investment allowance in respect of liability arising from exchange rate fluctuations related to the repayment of principal borrowed for acquiring capital equipment. The reference stands disposed of accordingly, with no order as to costs. No issue was expressly left undecided.

What were the facts?

This matter comes before the High Court of Gujarat at Ahmedabad as an Income Tax Reference (No. 166 of 1989) at the instance of the applicant-assessee, Ahmedabad Kaiser-I-Hind Mills Co. Ltd. The question of law was referred by the Income Tax Appellate Tribunal, Ahmedabad Bench 'A', under Section 256(1) of the Income-tax Act, 1961. The assessee company has been ordered to be wound up. The revenue was represented by its learned Standing Counsel, while no one appeared for the assessee despite due service of notice on the Official Liquidator. The court's attention was drawn to a previous judgment of the same court in CIT v. GSFC (I.T.R. No. 178/85) concerning a similar issue.

What were the issues?

1. Whether, on the facts and circumstances of the case, the assessee was entitled to investment allowance in respect of the liability arising out of the fluctuation in exchange rates relatable to the repayment of the principal amount borrowed for the purchase of capital equipment? (Question of law). The assessee's contention is not recorded as no one appeared on its behalf. The revenue, through its learned counsel, drew the court's attention to a previous judgment of the High Court in CIT v. GSFC (I.T.R. No. 178/85). The revenue's counsel submitted that a similar question was referred to a Full Bench in that case, and the majority view was that the assessee is entitled to investment allowance in such circumstances.

Which sections of the Income-tax Act were involved?

Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 166 of 1989

For Approval and Signature:

Hon'ble MR.JUSTICE A.R.DAVE and Hon'ble MR.JUSTICE K.M.MEHTA

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals?

-------------------------------------------------------------- AHMEDABAD KAISER-I-HIND MILLS CO.LTD. Versus COMMISSIONER OF INCOME TAX -------------------------------------------------------------- Appearance: 1. INCOME TAX REFERENCE No. 166 of 1989 NOTICE SERVED for Petitioner No. 1 MR MANISH R BHATT for Respondent No. 1 MRS MAUNA M BHATT for Respondent No. 1 NOTICE NOT RECD BACK for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE A.R.DAVE and MR.JUSTICE K.M.MEHTA

Date of decision: 20/11/2002

ORAL JUDGEMENT (Per : MR.JUSTICE A.R.DAVE)

At the instance of the applicant-assessee, the following question of law has been referred to this court by the Income Tax Appellate Tribunal, Ahmedabad Bench 'A', under the provisions of sec. 256(1) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act').

"Whether, on the facts and circumstances of the case, the assessee was entitled to investment allowance in respect of the liability arising out of the fluctuation in exchange rates relatable to the repayment of the principal amount borrowed for purchase of capital equipment?"

2.

Mrs. Mona M. Bhatt, learned Standing Counsel for the Central Government, has appeared for the revenue, whereas nobody has appeared for the applicant-assessee though the notice of this court has been duly served upon the Official Liquidator as the applicant company has been ordered to be wound up by this court.

3.

Our attention has been drawn by the learned counsel appearing for the respondent to a judgment delivered by this court in the case CIT v. GSFC being I.T.R. No. 178/85 on 19th October 2002. 4. It has been submitted by the learned counsel that a similar question had been referred to the Full Bench in the case referred to hereinabove. Majority view of the Bench is to the effect that the assessee in such a case is entitled to investment allowance in respect of liability arising out of the fluctuations in exchange rate relatable to repayment of principal amount borrowed for the purpose of purchase of capital equipment.

5.

Looking to the law laid down by this court in the judgment referred to hereinabove, we answer the question in the affirmative, that is, in favour of the assessee and against the revenue.

The reference, thus, stands disposed of accordingly with no order as to costs.

(A.R. Dave, J.)

(K.M. Mehta, J.) (hn)

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