COMMISSIONER OF INCOME TAX, MADRAS versus M/S. LUCAS T.V.S. LTD. PADI CHENNAI

Citation: [2007] 13 S.C.R. 958 · Decided: 14-12-2007 · Supreme Court of India · Bench: ARIJIT PASAYAT · Disposal: Appeal(s) allowed
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Judgment (excerpt)

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B 
COMMISSIONER OF INCOME TAX, MADRAS 
v. 
MIS. LUCAS T.V.S. LTD. PADI CHENNAI 
DECEMBER 14, 2007 
[DR. ARIJIT P ASAY AT AND P. SATHASIV AM, JJ.] 
Income Tax Act, 1961; Ss. 32A and 43A(l): 
Investment allowance-Allowing of in one or more than one 
C financial years-Held: S.43A(J) relates to fluctuation of foreign 
exchange and has nothing to do with allowability of investment in 
terms of s. 32(A) of the Act in one or more assessment years-High 
Court did not take into consideration the related provisions of law in 
its proper perspective while dismissing the appeal of the Revenue-
D Hence, matter remitted to High Court for adjudication afresh after 
formulating the question of law involved. 
The main issue arose for consideration in these appeals was 
as to whether investment allowance under Section 32A of the Income 
E Tax Act, 1961 could be allowed in one financial/assessment year only 
or in more than one financial years. The assessing officer was of the 
view that it is only to be allowed in one assessment year and not 
several assessment years. The Tribunal has proceeded on the basis 
that in view of Section 43A(l) of the Act the allowance could be 
F granted in different assessment years. The order of the Tribunal was 
affirmed by the High Court relying on the decision of the High Court 
in the case of Southern Asbestos Cement Ltd. v. Commissioner of 
Income Tax (259 I.T.R.631). Hence the present appeals. 
Appellant contended that Section 43A(l) of the Income Tax Act 
G relates to fluctuations of foreign exchange and its effect on the 
valuation of the assets. It has nothing to do with the question as to 
whether it is allowable in one year. Therefore, the decision relied 
upon by the High Court has no application. 
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958 
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COMMISSIONER OF INCOME TAX, MADRAS v. MIS. 
959 
LUCAS T.V.S.LTD. PADICHENNAI [PASAYAT,J.] 
Allowing the appeals, the Court 
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HELD: Since contention of the appellant-Revenue that 
S.43A(l) of the Income Tax Act relates to fluctuation of foreign 
exchange and its effect on the valuation of the assets and it has 
nothing to do with the question as to whether it is allowable in one 
B 
assessment year or more, accepted by respondent-assessee, the 
matter is remitted to the High Court for fresh adjudication after 
formulating the question oflaw involved. [Para 5) [971-E-G] 
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 5950-
5952 of2007. 
c 
From the final Judgment and Order dated 15.3.2004 of the High 
Court of Judicature at Madras in ITA Nos. 109-111 of2004. 
P.P. Malhotra, ASG., Dr. R.G. Padia, Arijit Prasad, Shweta and B.V. 
Balaram for the Appellant. 
D 
Radha Rangaswamy for the Respondent. 
The Judgment of the Court was delivered by 
DR. ARIJIT P ASAY AT, J. l. Leave granted. 
E 
2. Challenge in these appeals is to the order passed by a Division 
Bench of the Madras High Court dismissing the Tax Case Appeals as 
according to the High Court the case at hand is covered against the 
revenue in view of the order passed earlier by the High Court in Southern 
Asbestos Cement Ltd. v. Commissioner of Income Tax (259 l.T.R. F 
631). 
3. These appeals relate to assessment years 1989-90, 1991-92 and 
1992-93. The core issue is the allowability of investment allowance under 
Section 32A of the Income Tax Act, 1961 (in short the 'Act'). The 
G 
assessing officer was of the view that it is only to be allowed in one 
assessment year and not several assessment years. The Tribunal and the 
High Court appear to have proceeded on the basis that in view of Section 
43A(l) of the Act the allowance was to be granted in different assessment 
years. 
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960 SUPREME COURT REPORTS 
[2007] 13 (Addi.) S.C.R. 
A 
4. Sections 32A and 43A(l) of the Act read as under: 
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Sectfon 32A- INVESTMENT ALLOWANCE. 
(1) In respect of a ship or an aircraft or machinery or plant 
specified in sub-section (2), which is owned by the assessee 
and is wholly used for the purposes of the business carried 
on by him, there shall, in accordance with and subject to the 
provisions of this section, be allowed a deduction, in respect 
of the previous year in which the ship or aircraft was acquired 
or the machinery or plant was installed or, if the ship, aircraft, 
machinery or plant is first put to use in the immediately 
succeeding previous year, then, in respect of that previous year, 
of a sum by way of investment allowance equal to twenty-five 
per cent. of the actual cost of the ship, aircraft, machinery or
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