DCIT 1(3), MUMBAI V. VOLANT TEXTILES MILLS LTD, MUMBAI

ITA 2945/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8235 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 01-08-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 13-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C SRINIVAS REDDY
• Keywords: Depreciation

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F' BENCH, M UMBAI . , #$% &'( , ') *+ ' % BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI RAJENDRA, ACCOUNTANT MEMBER ./ ITA NO. 2945/MUM/2011 ( , , , , - - - - / ASSESSMENT YEAR : 2003-04 D C I T - 2(3) M/S. VOLANT TEXTILE MILLS LTD. ROOM NO. 55, AAYAKAR BHAVAN SHREE NIWAS HOUSE, GR. FLOOR M.K. ROAD, MUMBAI 400020 / VS. 27, H. SOMANI MARG MUMBAI 400001 +. ') ./ PAN - AAACV 2463 P ./ / APPELLANT 01./ / RESPONDENT ./ 2 ' / APPELLANT BY : SHRI C. SRINIVAS REDDY 01./ 3 2 ' / RESPONDENT BY : SHRI VIMAL PUNMIYA 3 4) / DATE OF HEARING : 02.08.2012 5- 3 4) / DATE OF PRONOUNCEMENT : 02.08.2012 *'6 / O R D E R PER D. MANMOHAN, V.P. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 11.01.2011 PASSED BY CIT(A) -2, MUMBAI AND IT PERTA INS TO A.Y. 2003-04. 2. THE ONLY GROUND URGED BEFORE US, AT THE INSTANCE OF THE REVENUE, READS AS UNDER: - 1. THE LEARNED CIT(A) HAS ERRED IN ALLOWING DEPREC IATION OF RS.45,61,252/- BEING ATTRIBUTABLE TO INCREASE IN VA LUE OF ASSETS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION. 3. THE FACTS NECESSARY FOR DISPOSAL OF THIS APPEAL ARE STATED IN BRIEF. THE ASSESSEE OBTAINED A LOAN FROM IDBI TO PURCHASE LAND AND MACHINERY IN FOREIGN CURRENCY AND CLAIMED DEPRECIATION THEREON. IN THE YEAR UNDER CONSIDERATION, DUE TO EXCHANGE RATE FLUCTUATIONS, T HE AMOUNT PAYABLE TO THE SELLER WAS A HIGHER FIGURE AND HENCE ASSESSEE CLAIM ED DEPRECIATION ITA NO. 2945/MUM/2011 M/S. VOLANT TEXTILE MILLS LTD. 2 ACCORDINGLY BY INVOKING PROVISIONS OF EXPLANATION 2 TO SECTION 43A OF THE ACT. 4. DURING THE COURSE OF SCRUTINY PROCEEDINGS THE AO NO TICED THAT SIMILAR CLAIM MADE BY THE ASSESSEE IN RESPECT OF A.Y. 2001- 02 WAS REJECTED BY DISALLOWING CAPITALISATION OF FOREIGN EXCHANGE FLUC TUATIONS AND THE ASSESSEE HAVING ACCEPTED THE SAID DISALLOWANCE FOR THE AFORE MENTIONED ASSESSMENT YEAR, EVEN IN THE YEAR UNDER CONSIDERATION, THE AO DID NOT ALLOW THE CLAIM OF DEPRECIATION. 5. IT MAY BE NOTICED THAT SIMILAR DISALLOWANCE WAS MAD E IN ASSESSMENT YEARS 2004-05 AND 2006-07. IN AN APPEAL FILED BY TH E ASSESSEE FOR A.Y. 2004-05 THE LEARNED CIT(A) PASSED A DETAILED ORDER WHEREIN HE CONCLUDED THAT DUE TO INCREASE IN FOREIGN EXCHANGE RATE THERE WAS INCREASED LIABILITY IN INDIAN RUPEES WHICH WAS DEBITED TO PLANT AND MACHIN ERY AS PER SECTION 43 OF THE ACT AND HENCE THE ASSESSEE IS ENTITLED TO CL AIM DEPRECIATION ON SUCH INCREASED VALUE OF PLANT AND MACHINERY. IN RESPECT OF A.Y. 2003-04 THE LEARNED CIT(A)- 2, MUMBAI FOLLOWED HIS PREDECESSOR S ORDER AND DIRECTED THE AO TO ALLOW THE DEPRECIATION. 6. REVENUE PREFERRED AN APPEAL BEFORE US CONTENDING, I NTER ALIA, THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM DEPRECIATION ON T HE INCREASED VALUE OF ASSETS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATIONS. 7. AT THE TIME OF HEARING THE LEARNED D.R. ADMITTED TH AT AGAINST THE ORDER OF THE CIT(A) FOR ASSESSMENT YEARS 2004-05 AS WELL AS 2006-07 THE REVENUE DID NOT PREFER ANY APPEAL AND ACCEPTED THE VIEW TAK EN BY THE CIT(A). EVEN OTHERWISE NO MATERIAL WAS BROUGHT BEFORE US TO SHOW THAT THE VIEW TAKEN BY THE LEARNED CIT(A) IS NOT IN CONSONANCE WITH THE PR OVISIONS OF THE ACT. 8. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT AS PER SECTION 43A OF THE INCOME TAX ACT, 1961 WHERE AN ASSESSEE HAS ACQUIRED ANY ASSET FROM A COUNTRY OUTSIDE INDIA, IN CONSEQUENCE OF A CHANGE IN THE RATE OF EXCHANGE DURING ANY PREVIOUS YEAR AF TER THE ACQUISITION OF SUCH ASSET, THERE IS AN INCREASE OR REDUCTION IN TH E LIABILITY OF THE ASSESSEE AS EXPRESSED IN INDIAN CURRENCY, THE AMOUNT OF LIAB ILITY AS AFORESAID HAS TO ITA NO. 2945/MUM/2011 M/S. VOLANT TEXTILE MILLS LTD. 3 BE SO INCREASED OR DECREASED. UNDER THE CIRCUMSTANC ES THE CLAIM OF DEPRECIATION ON THE INCREASED LIABILITY IS IN ACCOR DANCE WITH LAW. IT IS ALSO EMPHASISED THAT THE REVENUE ACCEPTED THE VIEW TAKEN BY THE LEARNED CIT(A) IN RESPECT OF ASSESSMENT YEARS 2004-05 AS WELL AS 2 006-07. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. HAVING REGARD TO THE CIRCUMSTANCES OF THE C ASE AND IN THE LIGHT OF THE DECISIONS PLACED BEFORE US IN THE WRITTEN SUBMISSIO NS DATED 04.03.2012, WE ARE OF THE VIEW THAT THE ORDER PASSED BY THE LEARNE D CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND AUGUST 2012. *'6 3 - )' 7 8* 9 02.08.2012 3 : SD/- SD/- (RAJENDRA) (D. MANMOHAN) ') *+ / ACCOUNTANT MEMBER #$%/ VICE PRESIDENT MUMBAI ; 8* DATED: 2 ND AUGUST 2012 *'6 *'6 *'6 *'6 3 33 3 0,4<= 0,4<= 0,4<= 0,4<= >'=-4 >'=-4 >'=-4 >'=-4 / COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. ? ( ) / THE CIT(A)- II, 4. ? / CIT - I, 5. =@: 0,4, , , / DR F BENCH , ITAT, MUMBAI 6. : / GUARD FILE. *'6 *'6 *'6 *'6 / BY ORDER, 1=4 0,4 //TRUE COPY// # ## # / & & & & (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . , . ./ N.P., SR. PS