S.H. Kapadia, J. - (1.) Leave granted.
(2.) This batch of civil appeals concerns 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 context of such charges.
(3.) The lead matter in this batch of civil appeals is civil appeal arising out of S.L.P.(C) No. 8363 of 2009. It concerns assessment year 1986-87. Assessee is a manufacturing company. It manufactures gears and mechanical handling equipments. It procured a foreign currency loan for expansion of existing business. 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 cost. Accordingly, the assessee booked forward contracts with Citibank for delivery of the required foreign currency on the stipulated dates. The contract was entered into for entire outstanding amount and the delivery of foreign currency was obtained under the contract for instalment due from time to time. The balance value of the contract, after deducting the amount withdrawn towards repayment, was rolled over for a further period up to the date of the next instalment. Assessee filed its return of income for assessment year 1986-87 on 30.6.1986. A revised return was filed by it on 27.3.1989 declaring a total income of Rs. 2,10,08,640/-. 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 contracts to Citibank N.A. on the ground that the said charges were incurred in connection with the purchase of a capital asset (plant and machinery), hence, it was not admissible for deduction under Section 36(1)(iii) or under Section 37 of the 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. According to CIT (A), roll over premium charge(s) constituted an expenditure incurred for raising loans on revenue account, hence, the said expenditure was allowable under the Act. It may be noted that CIT (A) did not refer to a specific section under which assessee was entitled to such deduction. The CIT(A) did not examine Section 43A of the said Act. 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.;