COMMISSIONER OF INCOME TAX VS KIRLOSKAR ELECTRIC CO. LTD., 1993 PTD-SUPREME-COURT-INDIA 917 (1992)

(Appeals by special leave from the judgment and order dated August 3, 1978, of the Karnataka High Court in LT.R. Cs. Nos. 65 to 68 of 1975).

Income-tax---

----Depreciation---Development rebate----Actual cost---Amount deposited in pounds sterling in Bank in U.K. prior to devaluation of rupee---Machinery purchased after devaluation---Cost paid out of amount standing to assessee's credit In U.K: --Actual cost---Is rupee value after devaluation- Income Tax Act, 1961, Ss. 32, 33 & 43(1).

A foreign company which had, under a collaboration agreement subscribed to shares in the respondent-company, deposited the subscription amount in pounds sterling in- a bank in the U.K. prior to the devaluation of the rupee. After the devaluation of the rupee on June 6, 1966, the respondent purchased some machinery in the UX by paying the purchase price out of the amount to its credit in a bank in the U.K. The machinery was brought to India and installed in the respondent's factory. The High Court held that the actual cost of the machinery for depreciation and development rebate would be the rupee value of the amounts paid in pounds sterling at the post-devaluation rate: see (1978) 115 ITR 907. On appeal to the Supreme Court:

Held, affirming the decision of the High Court that for the purpose of section 43(1) of the Income Tax Act, 1961, the actual cost incurred by the respondent was the equivalent in Indian currency of the amounts paid in sterling at the rate of exchange current on the relevant dates of purchase subsequent to devaluation.

Kirloskar Electric Co. Ltd. v. CIT (1978) 115 ITR 907 affirmed.

J. Ramamurthy, Senior Advocate (Ranbir Chandra, T.V. Ratnam and Ms. A. Subhashini, Advocates with him) for Appellant.

G. Sarangan, Senior Advocate, (S. Ramabhadran and Mukul Mudgal, Advocates with him) for Respondent.

ORDER

Heard counsel on both sides. From the facts stated by the Tribunal and found by the authorities, it appears to be beyond doubt that the plant and machinery had been purchased subsequent to the date of devaluation of Indian currency which occurred on June 6, 1966. It is also not disputed that the prices for the said plant and machinery had been paid by the assessee in English currency out of funds retained by it in England prior to the date of devaluation. On the basis of these facts, there is no doubt that for the purpose of section 43(1) of the Income Tax Act, 1961, the actual cost incurred by the assessee is the equivalent in Indian currency of the amounts paid in sterling at the rate of exchange current on the relevant dates of purchase subsequent to devaluation. On the basis of these facts and in view of section 43, we see no reason to doubt the correctness of the conclusion reached by the High Court.

Accordingly, the appeals are dismissed. No costs.

'M.BA./2276/T Appeals dismissed.