Commissioner of Income-tax Vs. Tata Iron and Steel Co. Ltd. - Court Judgment

Excerpt:
head note: income tax depreciation--actual cost--fluctuation in rate of foreign exchange resulting in loss or gain while repaying instalments of foreign loan acquired for purchasing asset(s). ratio : fluctuation in rate of foreign exchange resulting in loss or gain while repaying instalments of foreign loan would not alter cost incurred for acquiring asset for computing depreciation. held : it is difficult to follow how the manner of repayment of loan can affect the cost of the assets acquired by the assessee. what is the actual cost must depend on the amount paid by the assessee to acquire the asset. the amount may have been borrowed by the assessee, but even if the assessee did not repay the loan it will not alter the cost of the asset. if the borrower defaults in repayment of a part of the loan, the cost of the asset will not change. what has to be borne in mind is that the cost of an asset and the cost of raising money for purchase of the asset are two different and independent transactions. even if an asset is purchased with non-repayable subsidy received from the government, the cost of the asset will be the price paid by the assessee for acquiring the asset. in the instant case, the allegation is that at the time of repayment of loan, there was a fluctuation in the rate of foreign exchange as a result of which, the assessee had to repay a much lesser amount than he would have otherwise paid. this is not a factor which can alter the cost incurred by the assessee for purchase of the asset. the assessee may have raised the funds to purchase the asset by borrowing but what the assessee has paid for it, is the price of the asset. that price cannot change by any event subsequent to the acquisition of the asset. the manner or mode of repayment of the loan has nothing to do with the cost of an asset acquired by the assessee for the purpose of his business. therefore, the questions were rightly answered by the high court. application : in view of the insertion of section 43a by the finance (no. 2) act, 1967, with effect from 1-4-1967 the ratio of the present case is not applicable to current assessment year. a. y. : 1961-62 income tax act 1961 s.32 - labour & services back wages: [s.b.sinha & markandey katju, jj] held, it does not include bonus. meaning of wages as defined in the statute under which the award made is applicable. in industrial dispute relating to termination of services of respondent workmen on ground of having participated in illegal strike, labour court directing reinstatement and payment of 50% of their wages/allowances whether the same included direction for payment of bonus for the period in question right to bonus having been statutorily provided for the first time under the payment of bonus act, 1965 and labour court not determining any right under the 1965 bonus act, but rather under the u.p.i.d. act, 1947, held, labour court must have had in mind the provisions of the u.p.i.d. act alone presiding officer of labour court is a judicial authority. he is supposed to know the definition of wages as contained in u.p.i.d. act, 1947, which excludes bonus. furthermore, words used by a competent court must be given the same meaning as given in a statute. hence, labour commissioner exercising power under section 6-h(1), u.p. i.d. act, 1947 (corresponding to section 33-c(1), id act, 1947) in directing payment under the award in question erred in opining that bonus is deferred wages and so included in back wages, which view had been erroneously upheld both by single judge and division bench of the high court. industrial disputes act, 1947 [c.a. no. 14/1947]. section 2(rr); definition clause use of the words includes and means and includes difference in effect of u.p.i.d. act, 1947 (28/1947) section 2(y) wages scope of use of the words includes and means and includes difference in effect of held, the former implies that the definition is extensive while the latter implies that the definition is exhaustive industrials disputes act 1947 [c,a, no. 14/1947]. schedule 3, item 5; bonus right to bonus held, such a right was statutorily provided for the first time under payment of bonus act, 1965. neither the i.d.act, 1947 nor any of the other corresponding laws provides for a right to bonus. schedule 3 item 5, of i.d. act, 1947 only deals with jurisdiction of tribunals set up under sections 7, 7a & 7b. i.d. act, 1947 but does not provide for any right to bonus. interpretation of statutes. internal aids; definition clause use of the words includes and means and includes difference in effect of - use of the words includes and means and includes difference in effect of held, the former implies that the definition is extensive while the latter implies that the definition is exhaustive . judgments; interpretation of judgments - relevance of meanings given to words in relevant statute(s) held, words used by a competent court of law must be given the same meaning which is given in the applicable statute. interpretation of statutes. particular statutes or provisions; interpretation of labour laws diverse authorities exercising overlapping jurisdictions under various statutes manner in which labour statutes to be interpreted for that dispute stated. section 2(21); held, wages do not include bonus. bonus; calculation of held, payment of bonus act, 1965 excludes bonus for the purpose of calculating the amount of bonus to be determined in terms of section 10. bonus;]held, it does not include wages and does not come within the meaning of remuneration either. section 2(vi); wages held, it does not include. - in the instant case, the allegation is that at the time of repayment of loan, there was a fluctuation in the rate of foreign exchange as a result of which, the assessee bad to repay a much lesser amount than he would have otherwise paid.although several questions of law were raised before the high court, we are here concerned only with the following two questions :'(2) whether, on the facts and in the circumstances of the case, and having regard to the fact that the net gain of rs. 48,984 was made by the assessee-company from fluctuations in the rate of foreign exchange while repaying the instalments of the foreign loan for the assessment year 1960-61, the appropriate part of the said gain (i.e., after excluding that portion of it which is attributable to the element of interest) was gain on capital account which went to reduce the actual cost of the depreciable assets for computing depreciation for the assessment year 1960-61 ?(3) whether, on the facts and in the circumstances of the case and having regard to the fact that the net loss of rs. 29,063 and net loss of rs. 58,28,839 accrued to the assessee-company from the fluctuations in the rate of foreign exchange for the assessment year 1961-62, the appropriate part of each of the said two amounts (i.e., after excluding that portion of it which is attributable to the element of interest) was loss on capital account which went to increase the actual cost of the depreciable assets for computing depreciation for the assessment year 1961-62 ?'the high court has followed its earlier decisions in the case of cit v. tata hydro electric power supply co. ltd. : [1986]159itr28(bom) . a point has been taken on behalf of the respondents that the department not having come up in appeal against that decision, must be taken to have accepted the law stated in that decision as correct. therefore, it should not be allowed to agitate these questions in this court.mr. murthy, learned senior counsel appearing on behalf of the department, has pointed out that we are concerned in this case with assessment for the assessment years 1960-61 and 1961-62. the relevant assessment years in the judgment relied upon by the high court were 1970-71 and 1971-72. the high court in those cases relied on the provisions of section 43a of the income-tax act which came into force on april 1, 1967. in the instant case, there is no scope for application of section 43a. therefore, the decision rendered in the case relied upon by the high court cannot have any bearing on the controversy now raised. we are of the view that mr. murthy is right in his contention on this aspect of the matter.coming to the question raised, we find it difficult to follow how the manner of repayment of loan can affect the cost of the assets acquired by the assessee. what is the actual cost must depend on the amount paid by the assessee to acquire the asset. the amount may have been borrowed by the assessee, but even if the assessee did not repay the loan it will not alter the cost of the asset. if the borrower defaults in repayment of a part of the loan, the cost of the asset will not change. what has to be borne in mind is that the cost of an asset and the cost of raising money for purchase of the asset are two different and independent transactions. even if an asset is purchased with non-repayable subsidy received from the government, the cost of the asset will be the price paid by the assessee for acquiring the asset. in the instant case, the allegation is that at the time of repayment of loan, there was a fluctuation in the rate of foreign exchange as a result of which, the assessee bad to repay a much lesser amount than he would have otherwise paid. in our judgment, this is not a factor which can alter the cost incurred by the assessee for purchase of the asset. the assessee may have raised the funds to purchase the asset by borrowing but what the assessee has paid for it, is the price of the asset. that price cannot change by any event subsequent to the acquisition of the asset. in our judgment, the manner or mode of repayment of the loan has nothing to do with the cost of an asset acquired by the assessee for the purpose of his business. we hold that the questions were rightly answered by the high court. the appeals are dismissed. there will be no order as to costs.