UNION CARBIDE INDIA LTD. vs COMMISSIONER OF Income Tax.

DIPAK KUMAR SEN J. - Union Carbide India Limited, the applicant, seeks a certificate from this court that the judgment dated June 24, 1986, delivered in the above Income Tax reference involves a substantial question of law and is a fit case for appeal to the Supreme Court.

The question of law involved, said to be one of substance, is as follows :

"Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that the excess payments of Rs. 6,34,484 and Rs. 42, 284 made on account of fluctuations in the exchange rates of dollars, at the time of repayment of the dollar loan, raised from EXIM Bank and ICICI, respectively, for purchasing machinery from abroad was a capital expenditure and not an allowable revenue expenditure ?"

The learned advocate for the applicant submitted that in the case of the same assessee, a certificate as prayed for here was granted by this court in Income Tax Reference No. 127 of 1977 entitled Union Carbide India Ltd. v. CIT on July 21, 1981, where the question involved was whether the additional expenditure incurred due to devaluation would be an allowable deduction in computing the business income of the assessee.

The learned advocate for the Revenue submitted that a special leave application field before the Supreme Court from the judgment delivered by the Madras High Court in the case of Commissioner of Income Tax Vs. South India Viscose Ltd., , where the same point was involved, was rejected by the Supreme Court on August 2, 1983, as reported in Lucknow Producers'' Co-operative Milk Union Ltd. Vs. Commissioner of Income Tax, .

The learned advocate for the applicant contended in reply that the question raised was one of some importance and was likely to recur in many international transactions. He also submitted that rejection of a special leave appeal by the Supreme Court in limine cannot be construed to be an affirmation of the judgment sought to be appealed from. In support of his submission. he cited a judgment of the Supreme Court in Late Nawab Sir Mir Osman Ali Khan Vs. Commissioner of Wealth Tax, Hyderabad, as also Indian Oil Corporation Ltd. Vs. State of Bihar and others, .

It appears to us that inasmuch as one aspect of the question raised, namely, the allowability of loss arising out of devaluation in the case of the same assessee has already been referred to the Supreme Court, the question in the instant application may also be so referred. In our view, the question is one of substance and was not directly involved in the decision of the Madras High Court referred to hereinabove. In the assessment years involved in the said decision, section 43A of the Income Tax Act, 1961, was not promulgated.

For the reasons as aforesaid, this application is allowed. Let a certificate be issued as prayed for. There will also be an order in terms of prayer (b). Let the order for issue of the certificate be drawn up separately.

There will be no order as to costs.

SHYAMAL KUMAR SEN J. - I agree.