The question before the High court was “Whether the increase in loan liability of the assessee due to fluctuation in foreign exchange rates in the subsequent years was part of actual cost of the ship by name M/s. M.V. Prabhu Parvati acquired on 1-6-1984 from the foreign country and the assessee was entitled to invest allowance on the additional cost in the year of acquisition?” Allowing the appeal of the assessee the Court held that assessee acquired ship for which it took loan and subsequently actual cost of ship increased due to foreign exchange fluctuation, said increase in loan liability would be part of actual cost of ship and thus assessee was entitled to investment allowance on additional cost in year of acquisition. The increase or reduction in the liability has to take place only in the year of fluctuation and it does not relate back to the year of acquisition of the asset (AY. 1985-86, 1987-88 to 1990-91 & 1992-93)