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2010 (6) TMI 620 - AT - Income TaxDepreciation on account of foreign exchange fluctuation disallowed - Held that:- As decided in CIT v. Woodward Governor India (P.) Ltd. [2009 (4) TMI 4 - SUPREME COURT] additional liability due to exchange fluctuation would result in modification of the actual cost in the year in which increase or decrease arises on account of such fluctuation - thus value of the asset would move in accordance with change in foreign exchange rates as on the last day of the previous year and assessee would be eligible for claiming depreciation based on such value, for the impugned assessment year - Decided in favor of the assessee Provision of leave encashment disallowed - Held that:- Revenue has not disputed that assessee had made the provision for leave encashment in accordance with actuarial valuation - As held in Bharat Earth Movers (2000 (8) TMI 4 - SUPREME Court), liability that could arise on account of leave encashment, was in praesenti. Assessee has made available actuarial certificate and provision was an ascertained liability. Just because in the earlier years, it was accounting leave encashment based on actual payment, cannot preclude it from moving to a scientific method, especially when it was following mercantile system of accounting - no error in the order of the CIT(A) in deleting such addition while computing the book profits for the purpose of ascertaining MAT liability - Decided in favor of the assessee. Provision for bad and doubtful debts disallowed - Held that:- Parliament in its wisdom chose to add cl. (g) to the Explanation to s.115JA whereby any amount set aside for diminution of value of any asset had to be added back to the net profit as shown in the P&L a/c, for computing the book profit for ascertaining the MAT liability. As held in Mysore Breweries Ltd. (2009 (9) TMI 829 - KARNATAKA HIGH COURT) retrospective insertion of cl. (g) had to be considered. Hence, provision for bad debt needed to be added back to the net profit while working out MAT liability. In favour of revenue. Loss from assessee's windmill operations - whether be deleted while working out the MAT liability - Held that:-he amount of profits derived by the industrial undertaking from the business of generation and distribution of power has to be reduced from the net profit, irrespective of the fact that whether such profits appear in the P&L a/c or not. If that be so, can we extend it to say that even if it were losses then also it had to be considered as an addition. In our opinion, the clear answer is a 'no' - AO does not have any jurisdiction to go beyond the net profit shown in the P&L a/c, the except to the extent provided in the Explanation. Further, we also find that assessee had never claimed any loss as such, but on the other hand, receipts and expenses were separately shown and AO had himself computed a loss and made the addition. Thus the AO had made a wrong application of the Explanation. He misinterpreted cl. (iv) thereof, by making an addition, relying on that clause which specifically provided for reduction. CIT(A) was justified in deleting the addition made to the net profit of the assessee, the losses arising to it on windmill operation. In favour of assessee. Disallowance towards provision for wealth-tax while computing its book profits for the purpose of ascertaining MAT liability - Held that:- The provision for wealth would come within the ambit of cl. (a) of Explanation to 115JA of the Act. We set aside the order of the CIT(A) in this regard and restore the order of the AO. In favour of revenue. Expenditure incurred for fly air ash collection system - revenue v/s capital - Held that:- Assessee for the purpose of collecting the fly ash had made a construction in a property not owned by it on a condition agreed with TNEB, that the construction and the equipment would become latter's property. If that be so, we wonder how it could be considered as capital asset of the assessee. Just because it facilitated the smooth procurement of an essential raw material, it could not be said that any enduring benefit had come to the assessee. As decided in CIT v. TVS Lean Logistics Ltd. [2007 (6) TMI 44 - HIGH COURT, MADRAS] wherein it was held that hen an assessee had constructed a building on a leasehold land, it could not be considered that there was any acquisition of capital asset. In favour of assessee.
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