Law: Income Tax Act, 1961

Section: 32,3343(1)

Income-tax----Depreciation---Development rebate----Actual cost---Amount deposited in pounds sterling in Bank in U.K. prior to devaluation of rupee---Machinery purchased after devaluation---Cost paid out of amount standing to assessee's credit In U.K: --Actual cost---Is rupee value after devaluation- Income Tax Act, 1961, Ss. 32, 33 & 43(1). A foreign company which had, under a collaboration agreement subscribed to shares in the respondent-company, deposited the subscription amount in pounds sterling in- a bank in the U.K. prior to the devaluation of the rupee. After the devaluation of the rupee on June 6, 1966, the respondent purchased some machinery in the UX by paying the purchase price out of the amount to its credit in a bank in the U.K. The machinery was brought to India and installed in the respondent's factory. The High Court held that the actual cost of the machinery for depreciation and development rebate would be the rupee value of the amounts paid in pounds sterling at the post-devaluation rate: see (1978) 115 ITR 907. On appeal to the Supreme Court: Held, affirming the decision of the High Court that for the purpose of section 43(1) of the Income Tax Act, 1961, the actual cost incurred by the respondent was the equivalent in Indian currency of the amounts paid in sterling at the rate of exchange current…

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