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2012 (6) TMI 680 - ITAT MUMBAIDepreciation on loss due to fluctuation of foreign exchange and capitalization u/s 43A - CIT denied the capitalization as the asset did not exist in the Block of Assets - Held that:- Considering the provisions of section 43A that if there is a change in the rate of foreign exchange after the acquisition of assets, as a result of which there is an increase or reduction in the liability of the assessee as expressed in the Indian currency, then such increase or reduction shall be added to or deducted from the actual cost of the asset and after giving effect to this adjustment the actual cost of the assets shall stand substituted with the new figure. Depreciation - Definitions contained in section 32 r.w.s.43(1) & (6) describes the depreciation is to be allowed on the actual cost of the asset less all depreciation actually allowed in respect thereof in earlier years. Thus, where the cost of the asset subsequently goes up because of devaluation, whatever might have been the position in the earlier year, it is always open to the assessee to insist, and for the Income-tax Officer to agree, that the written down value in the year in which the increased liability has arisen should be taken on the basis of the increased cost minus depreciation earlier allowed on the basis of the old cost - in favour of assessee. Loss on fluctuation of foreign currency in respect of development cost u/s 42 - AO has considered the claim of the assessee u/s 42(1)(a) whereas the claim falls under section 42(1)(b)by assessee - Held that:- Section 42(1)(b) entitles the assessee to deduction after the beginning of the commercial production and the case of the assessee is that it was working in consortium, however necessary details could not be placed to show that the assessee had commenced production - set aside this issue to the record of the CIT(A) for deciding the issue afresh in terms of the directions of the Tribunal in the earlier year - in favour of assessee by way of remand. Treatment of interest income as income from other sources claimed by the assessee for the purpose of deduction u/s 80IB(9)- department treated it as business income - Held that:- As the deduction u/s 80IB(9) is not available to the interest received from bank deposits as the receipt of interest does not comes within first decree source as derived from the undertaking, accordingly, the issue is decided against the assessee. Setting off of brought forward losses and unabsorbed deprecation against business profit a determined by AO - Held that:- As this issue is subjected to the outcome of the issue involved for the AY 2001-02 the same may be remanded back to the record of the AO to decide the issue as per the outcome of the appeal for the AY 2001-02 pending before the Tribunal. Eligibility of deduction/s 80IB on extraction of oil from oil field - Held that:- As in the case of CIT vs Sesa Goa Ltd [2004 (11) TMI 14 (SC)] the assessee in the extracting process of iron ore, the High Court came to the conclusion that extraction of iron ore and the various process would involve ‘production’ within the meaning of sec 32A(2)((b)(iii) and consequently, the assessee was entitled to the benefit of investment allowance under sec. 32A. The view expressed by the High Court that the activity of extraction and processing of iron ore constitute production has been affirmed by the Supreme Court -every manufacturer can be characterised as production, every production need not amount to manufacture - in favour of assessee. Treatment of provision of site restoration expenses - computation of the book profit u/s 115JB - Held that:- As the Site Restoration expenses are scientifically estimated by an independent agency for determining the abandonment costs of contracted area in accordance with the guidelines issued by the ICAI, then it cannot be said as contingent liability - the provision has been made as per the requirement under the Production Sharing Contract and the appellant is liable to contribute this amount to site restoration fund in each year. In view of these facts, the provision is made for an ascertained liability - in favour of assessee.
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