Case Law Details
CASE LAWS DETAILS
DECIDED BY: SUPREME COURT OF INDIA
IN THE CASE OF: Oil & Natural Gas Corp. Ltd. Vs Commissioner of Income Tax, APPEAL NO: Civil Appeal No. 7223 of 2008, DECIDED ON: March 15, 2010
RELEVANT PARAGRAPH
12. On the question whether an Assessee is entitled to adjust the actual cost of imported assets acquired in foreign currency on account of fluctuation in the rate of exchange at each balance-sheet date, pending actual payment of the varied liability with reference to unamended Section 43A of the Act, in Woodward’s case (supra), the Court observed thus:
“…what triggers the adjustment in the actual cost of the – assets, in terms of the unamended section 43A of the . 1961 Act is the change in the rate of exchange subsequent to the acquisition of asset in foreign currency. The section mandates that at any time there is change in the rate of exchange, the same may be given effect to by way of adjustment of the carrying cost of the fixed assets acquired in foreign currency. But for section 43A which corresponds to paragraph 10 of AS-II such adjustment in the carrying amount of the fixed assets was not possible, particularly in the light of section 43(1). The unamended section 43A nowhere required as condition precedent for making necessary adjustment in the carrying amount of the fixed asset that there should be actual payment of the increased/decreased liability as a consequence of the exchange variation. The words used in the unamended section 43A were “for making payment” and not “on payment” which is now brought in by amendment to section 43A, vide the Finance Act, 2002.”
Opining that the amendment of Section 43A of the Act by the Finance Act, 2002 with effect from 1st April, 2003 is amendatory and not clarificatory and would thus, apply prospectively, the Court explained that under the unamended Section 43A, adjustment to the actual cost takes place on the happening of change in the rate of exchange, whereas under the amended Section 43A, the adjustment in the actual cost is made on cash basis. In other words, under the unamended Section 43A, “actual payment” was not a condition precedent for making necessary adjustment in the carrying cost of the axed asset acquired in foreign currency I but under the amended Section 43A, with effect from 1st April, 2003, such payment of the decreased/enhanced liability on account of fluctuation in foreign exchange rate has been made a condition precedent for making adjustment in the carrying amount of the fixed asset.
13. We are of the opinion that the decision of this Court in Woodward’s case (supra) settles the second issue as well. We respectfully concur with the same and hold that all the assessment years in question being prior to the amendment in Section 43A of the Act with effect from 1st April, 2003 the assessee would be entitled to adjust the actual cost of the imported capital assets, acquired in foreign currency, on account of fluctuation in the rate of exchange at each of the relevant balance-sheet dates pending actual payment of the varied liability.
