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2019 (4) TMI 765 - AT - Income TaxDisallowance of Foreign Exchange Fluctuation loss - treating the same as capital in nature - HELD THAT:- The assessee offered the interest earned on loan given to RIDO to income tax. The entire loan was repaid by RIDO during the assessment year under consideration as can be seen from Schedule 9 of the Notes to Accounts. As per AS-11, treatment of foreign exchange loss arising out of foreign currency fluctuations in respect of fixed assets acquired through loan in foreign currency shall required to be given in profit and loss account and the same should be allowed as revenue expenditure. The Hon’ble Apex Court in Woodward Governor India (P) Ltd (2009 (4) TMI 4 - SUPREME COURT) had followed treatment of exchange loss or gain as per AS-11 (1994). In view of revision made in AS-11 in 2003, exchange gain or loss on foreign currency fluctuations in respect of foreign currency loan acquired for acquisition of fixed asset should be allowed as revenue expenditure. In the present case, the CIT(A) as well as the AO has not taken into account the decision of the Apex Court in case of Indian Cements Ltd. [1965 (12) TMI 22 - SUPREME COURT] wherein it was held that the nature of expenditure being capital or revenue does not depend on the purpose for which foreign currency loan was obtained or on nature of ultimate utilization of loan amount - as per the accounting policy AS-11 (2003), the assessee is entitled to claim such foreign currency fluctuation loan as an allowable expenditure u/s 37 (1) - CIT(A) was incorrect in disallowing the foreign exchange fluctuation loss of by treating it as capital in nature. - Decided in favour of assessee Disallowance of claim of Leave Encashment on provision basis - Addition u/s 43B - HELD THAT:- Leave Encashment under no circumstance can be called as a statutory liability/payment so as to invoke the provision of Section 43B as it is for the benefit of employees which accrues in lieu of the un-availed leave during the tenure of one’s service in the organization. The ratio set out in case of Exide Industries Ltd. [2007 (6) TMI 175 - CALCUTTA HIGH COURT] is applicable in the present case as in that decision it was held that leave encashment not being a statutory liability or a contingent liability, enactment of Sec. 43B(f) is not consistent with the original provision of Sec. 43B, and the legislature having disclosed no reasons while inserting the said clause, Sec. 43B(f) is struck down being arbitrary and unconscionable. Ground No. 2 of the assessee’s appeal is allowed. Disallowance of loss on account of foreign exchange fluctuation in computing book profit u/s 115JB - HELD THAT:- Section 115JB is an overriding section, as it is specifically mentioned in that section that the other provisions of this act is not applicable while computing book profit u/s 115JB of the Act is correct as per the Income Tax Act, 1961. In the absence of any provision in Explanation 1 to Sec. 115JB to make addition on account of expenditure towards foreign exchange fluctuation loss, the addition made by the AO is erroneous.Assessing Officer while computing the book profits of a company u/s 115J has only the power of examining whether the books of accounts are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. Sub-section (1A) of section 115J does not empower the Assessing Officer to embark upon a fresh enquiry in regard to the entries made in the books of accounts of the company. Ground No. 3 of the assessee’s appeal is allowed. Depreciation at 15% on Oilers Gas - higher rate of depreciation - @15% OR 60% - HELD THAT:- In the instant case of the assessee, both the conditions are duly satisfied since the oil rigs being plant of 'specific category' are owned by the assessee and further it is used in drilling operations for the purpose of exploration & extraction of mineral oil in the field of mineral oil concerns. The assessee claimed depreciation @ 60% on Oil rigs which has been used for drilling operations in the oil field of mineral oil concerns as per entry at Part A-III-(8) (xii) of New Appendix I, applicable from Assessment Year 2006-07 onwards. The same is evident from Annexure B to the Tax Audit Report for relevant assessment year. See M/S. HLS INDIA LTD. [2012 (2) TMI 669 - SUPREME COURT OF INDIA]].
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