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JUDGMENT M.R. Shrma, J.-The assessee is a registered firm deriving income from the manufacture and sale of shoddy yarn. It agreed to purchase one woollen card, one woollen ring spinning frame and one willow machine with spares from a Japanese company. The payment was to be made in foreign currency and on instalment basis. For the assessment year 1969-70, the assessee claimed development rebate on a sum of Rs. 9,89,017 spent towards the price of the machinery acquired during the relevant accounting period. The ITO while framing the assessment deducted a sum of Rs. 2,63,688 from this amount representing the cost of the machinery on account of devaluation and allowed the rebate on a sum of Rs. 7,25,329 only. The plea raised by the assessee that under s. 43A(2) of the IT Act, 1961 (hereinafter referred to as "the Act"), the increase in price on account of devaluation should be taken into consideration for development rebate, was negatived by the ITO and the AAC. It, however, prevailed with the Income-tax Appellate Tribunal, Amritsar Bench (hereinafter referred to as "the Tribunal"), which gave the assessee the necessary relief. At the instance of the revenue, the following question of law has been referred to us for our opinion : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the actual cost of the new machinery to the assessee was a sum of Rs. 9,89,017 on which development rebate was admissible ?" We have heard the learned counsel for the parties. Under s. 33 of the Act, deduction on account of development rebate has to be worked out on the basis of a certain percentage of "the actual cost of machinery or plant to the assessee". The words "actual cost" are defined in s. 43(1) of the Act. Section 43A(1) of the Act lays down that a change in the rate of exchange of currency has to be taken into consideration for determining the cost. Sub-s. (2) of this section, however, makes a departure from the normal rule and lays down that such a change shall not be taken into account in computing the actual cost of an asset for the purpose of the deduction on account of development rebate under s. 33 of the Act. In view…

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