Commissioner of Income Tax vs Frick India Ltd.

Arijit Pasayat, C.J.—At the instance of the Revenue, the following question has been referred for the opinion of this court by the Income Tax Appellate Tribunal, Delhi Bench "E" (in short, "the Tribunal"), u/s 256(1) of the Income Tax Act, 1961 (in short, "the Act") :

"Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the assessed was entitled to development rebate on increase in the cost of asset as a result of devaluation of rupee ?"

The dispute relates to the assessment year 1967-68.

The factual position in a nutshell is as follows :

The assessed, a private limited company, was originally assessed by order dated March 29, 1972, in which development rebate was allowed. Subsequently, notice was given to the assessed intimating that it was not entitled to development rebate on the enhanced value due to devaluation. The assessed objected to the action for rectification. Notwithstanding the objection, the Assessing Officer passed an order denying the benefit of development rebate. The matter was carried in appeal before the Commissioner of Income Tax (Appeals) (in short, "the CIT (A)"), who held that the withdrawal of development rebate was not proper. The matter was carried in appeal before the Tribunal. It was observed by the Tribunal that the withdrawal was not proper and, Therefore, the Commissioner of Income Tax (Appeals) order was not to be interfered with. On being moved for reference, the question as set out above has been referred for the opinion of this court.

We have heard learned counsel for the Revenue. There is no appearance on behalf of the assessed in spite of notice. Learned counsel for the Revenue submitted that in view of the decision of the apex court in Commissioner of Income Tax, Gujarat Vs. Arvind Mills Ltd., the assessed was not entitled to development rebate and in view of the conclusions of the apex court the action for rectification does not suffer from any infirmity.

As has been rightly submitted by learned counsel for the Revenue, the language of Section 43A of the Act is clear. There is a clear requirement of the statute that for the purpose of development rebate any increase or decrease in the actual cost consequent upon fluctuation in exchange rate should not be taken into account. That being the position, the Tribunal was not right in holding that the assessed was entitled to development rebate on the increase in the cost of asset as a result of devaluation of rupee. As the matter is concluded by a decision of the apex court, the rectification done was in order. The question, Therefore, has to be answered in the negative, in favor of the Revenue and against the assessed.