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2011 (9) TMI 666 - AT - Income TaxReference to Dispute Resolution Panel – Assessee, being a foreign company - DRP enhanced the assessment to impute profit on estimated basis which was not a variation proposed in the draft order passed by the ADIT u/s 144C(1) – dis-allowance of provision for foreseeable losses – non-quantification of additional depreciation on fixed assets, arising on account of capitalization of the foreign exchange fluctuation to the cost of the asset - Held that:- It is clear that in the proposed draft order vide objection No. 2, the variation proposed was only with reference to dis-allowance of future losses claimed whereas the DRP suo moto considered 20% of the total contract as completed during the year (which is in fact was not correct as assessee has offered more turnover in its books of account) and proposed bringing to tax the net profit at 8% of the above determined turnover. This direction of the DRP is wholly without jurisdiction and is not in conformity with the powers under section 144C(5) r.w.s. 144C(8). DRP can issue directions only in respect of the objections raised by the taxpayer and the objections are to be in terms of variation proposed in the draft order. In respect of provision for future losses it is held that there are evidence on record that assessee has suffered loss and loss claimed in that year on completion of the project stood allowed. Thereby, the assessee's claim for provision for loss, which was made in accordance with the guidelines of AS-7 and duly debited in the audited accounts of the company is an allowable expenditure. Further, in respect of additional depreciation A.O. is directed to examine this and allow depreciation as per law on the amount capitalized to assets and rework out depreciation accordingly.- Decided in favor of assessee.
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