Commissioner of Income Tax vs Madras Fertilizers Ltd.

V.S. Sirpurkar, J.—The two questions referred before us are :

Whether the Appellate Tribunal was right in its conclusion that there is no error prejudicial to the interests of revenue enabling the Commissioner of income tax to invoke section 263 even though the income tax Officer failed to apply the provisions of section 43A and allowed the enhancement caused by the variations in exchange as a revenue expenditure ?

Whether, on the facts and in the circumstances of the case and in view of the provisions contained in section 43A, the Appellate Tribunal was right in its conclusion that the enhancement due to the variations in exchange on the entire amount of loan outstanding as at the end of each accounting year has to be added to the actual cost of the plant and machinery and depreciation worked out thereon and not merely instalments of loan that fell due during the accounting years ?

At the outset, the learned counsel for the assessee very fairly states that as for the first question, the matter is covered against the assessee by a decision in Gnanambikai Mills Ltd. Vs. Commissioner of Income Tax, . The learned senior standing counsel also points out the same. In that view, that question is answered against the assessee and in favour of the revenue.

As for the second question, it is stated that the matter is covered against the revenue by a Supreme Court''s decision in CIT v. Arvind Mills Ltd. [1992] 193 ITR 2551 which was later on followed by this Court in Trichy Distilleries and Chemicals Ltd. Vs. Commissioner of Income Tax, . In that view, that question is answered in favour of the assessee and against the revenue. No costs.