Aggrieved by the decision of the Tribunal, the assessee filed an appeal s before the Gujarat High Court inter alia challenging the capitalization of the roll over charges paid in respect of foreign currency.
It companycerns assessment year 1986 87.
Vide order dated 21.3.2001, the Tribunal held that roll over premium charges carry forward charges were required to be paid to the authorized dealer as companysideration for permitting the unutilized amount of the companytract balance value of the companytract to be availed of at a latter date and in the circumstances roll over premium charges had to be capitalized under Explanation 3 to Section 43A of the said Act.
On appeal, the CIT A held that the roll over premium charge s incurred by the assessee was allowable as it was incurred by the assessee to mitigate the risk involved in higher payment because of adverse fluctuation of rate of exchange.
A revised return was filed by it on 27.3.1989 declaring a total income of Rs.2,10,08,640/ .
The balance value of the companytract, after deducting the amount withdrawn towards repayment, was rolled over for a further period up to the date of the next instalment.
The companytract was entered into for entire outstanding amount and the delivery of foreign currency was obtained under the companytract for instalment due from time to time.
Accordingly, the assessee booked forward companytracts with Citibank for delivery of the required foreign currency on the stipulated dates.
Assessee filed its return of income for assessment year 1986 87 on 30.6.1986.
Consequently, the Tribunal upheld the order of the assessment.
The A.O. disallowed an amount of Rs.8,86,280/ , being the roll over premium charges paid by the assessee in respect of foreign exchange forward companytracts to Citibank N.A. on the ground that the said charges were incurred in companynection with the purchase of a capital asset plant and machinery , hence, it was number admissible for deduction under Section 36 1 iii or under Section 37 of the Act.
Assessee is a manufacturing companypany.
It procured a foreign currency loan for expansion of existing business.
The CIT A did number examine Section 43A of the said Act.
Since the repayment of loan was stipulated in instalments, assessee desired to ensure that foreign currency required for repayment of the loan be obtained at a pre determined rate and companyt.
The said appeal s was allowed by the High Court which came to the companyclusion that the roll over premium charge s paid by the asssessee was in the nature of interest or companymittal charge s , hence, the said charges were allowable under Section 36 1 iii of the said Act, hence this civil appeal s .
H. KAPADIA, J. Leave granted.
This batch of civil appeals companycerns the nature of roll over premium charge incurred by the assessee as also the scope and applicability of Section 43A of the Income Tax Act, 1961 the Act for short , in the companytext of such charges.
The lead matter in this batch of civil appeals is civil appeal arising out of S.L.P. C No.8363 of 2009.
It manufactures gears and mechanical handling equipments.
The CIT A relied upon the judgment of the Supreme Court in support of its findings in the case of India Cements Ltd. v. Commissioner of Income Tax, Madras 1966 60 ITR 52.
