- (1.) The assessee is a company and the relevant assessment years are 1968-69 and 1969-70, corresponding accounting period being the calendar years ended on 31st December, 1967, and 31st December, 1968, respectively. The following questions of law have been referred by the Tribunal for opinion of this court : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 8,35,359 and Rs. 3,30,965, being the additional expenses incurred by the assessee in the payment of its loan to the Bank of Scotland due to the devaluation of the Indian rupee, was an expenditure wholly and exclusively laid out by the assessee for the purpose of its business and as such was an allowable revenue expenditure under Section 37(1) of the Income-tax Act, 1961, for the assessment years 1968-69 and 1969-70, respectively ? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the sum of Rs. 8,71,399, being the amount of guarantee commission paid to the bank represented a part of the capital expenditure and, therefore, was not allowable under Section 37(1) of the Income-tax Act, 1961, for the assessment year 1969-70? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the expression 'such profits and gains' appearing in section 80-I of the Income-tax Act, 1961, referred only to profits and gains attributable to priority industry as included in the gross total income and such profits and gains signified profits and gains of the priority industry determined and finally included in the gross total income in accordance with the provisions of the said Act including its sections 32, 33, 71 and 72? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that no depreciation was admissible on drains, culverts and roads for the assessment year 1969-70 ? "
(2.) The first question has been referred at the instance of the Revenue. The questions Nos. 2, 3 and 4 have been referred at the instance of the assessee.
(3.) The first question arises out of devaluation of the Indian rupee which took place on 6th June, 1966. On this question the Tribunal held as follows : " We have given a careful consideration to the rival submissions and do not find any merit to the objections raised on behalf of the Revenue before us. In view of the order of the Appellate Tribunal dated 31st December, 1975, relating to the assessment year 1967-68, which was passed after the orders of the Appellate Assistant Commissioner and the Income-tax Officer relating to the assessment years now under appeal before us, the assessee was perfectly justified in raising the issues in the grounds of appeal taken for the instant years. The statement appearing at page 24 of the assessee's paper book was relied upon by the Appellate Tribunal while disposing of the appeal relating to the assessment year 1967-68 and the sum of Rs. 9,85,664 forming part of Rs. 40,60,560 represented a sum total of two amounts of Rs. 4,86,147 and Rs. 4,99,517, being losses claimed by the assessee on account of remittances on 30th June, 1966, and 31st December, 1966, respectively. Therefore, we have no hesitation to accept the veracity of the statement of the assessee and to direct the Income-tax Officer to allow losses of Rs. 8,35,359 and Rs. 3,30,965 in the respective assessments for the assessment years 1968-69 and 1969-70. In this connection, we must mention here also that the assessee had in computing the losses taken into consideration the devaluation of pound sterling on 18th November, 1967. This has relevance for the departmental appeal relating to the assessment year 1968-69 (I.T.A. No. 537(C)/73-74). ";