July 2008
Question of Law — Investment allowance — Whether allowable in one year or in several years is a question of law — Decision of Madras High Court not applicable.
By Kishor Karia, Chartered Accountant
Atul Jasani, Advocate
Reading Time 2 mins
New Page 1
14 Question of Law — Investment allowance — Whether allowable
in one year or in several years is a question of law — Decision of Madras High
Court not applicable.
[CIT v. Lucas TVS Ltd., (2008) 297 ITR 429 (SC)]
The Assessing Officer was of the view that investment
allowance u/s.32A is only to be allowed in one assessment year and not in
several assessment years. The appeal related to the A.Ys. 1989-90, 1991-92 and
1992-93. The Tribunal held otherwise. The High Court dismissed the appeal in
view of its decision in Southern Asbestos Cement Ltd v. CIT, (2003) 259
ITR 631 (Mad.) in which it was held that the investment allowance in respect of
the incremental cost of the machinery, necessitated by the fluctuation in
foreign exchange rates is allowable to the assessee in the respective years in
which cost arose in view of S. 43A(1) of the Act.
On an appeal, the parties conceded before the Supreme Court
that S. 43A(1) relates to fluctuations of foreign exchange and its effect on the
valuation of the assets and that it had nothing to do with the question as to
whether it is allowable in one year and therefore the decision of the High Court
had no application. In that view of the matter, the Supreme Court set aside the
order of the High Court and remitted the matter for fresh adjudication after
formulating the question of law involved.
