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2022 (1) TMI 415 - AT - Income TaxDisallowance of foreign exchange loss on restatement of Export Earners Foreign Currency (EEFC) account - CIT(A)/ AO treating the foreign exchange loss on account of restatement of EEFC account as capital in nature - CIT(A) by relying on section 43A of the I.T. Act as amended by Finance Act, 2002 held that the loss on account of fluctuation in foreign exchange can be adjusted at the time of making payment but not on notional basis - HELD THAT:- Section 43A of the I.T. Act applies where an assessee acquires an asset in a previous year. The EEFC account was maintained by the assessee to facilitate regular business operation and not for acquiring any asset. Since the transaction in EEFC account undertaken during the year are trading in nature in order to facilitate the regular business operation of the assessee-company, we hold that the AO has erred in making an addition to the income returned and the CIT(A) was not justified in sustaining the same. Therefore, we delete the addition. It is ordered accordingly. TDS u/s 194I - Disallowance u/s 40(a)(ia) - whether the assessee had claimed depreciation on the leased asset and if so, add back the same to the total income? - HELD THAT:- Lessee shall reimburse all the cost to the lessor for replacing, missing components and repairing of non working components. From reading of the agreement between the assessee and First Leasing, it is clear that the actual owner of the leased asset is the lessor and First Leasing, the lessor, is entitled to claim depreciation The assessee-company has merely taken the assets on lease from the owner and it is accordingly eligible to claim actual rental expenses in the return of income. In the case of Rajshree Roadways v. Union of India [2003 (3) TMI 50 - RAJASTHAN HIGH COURT] had held that the lessor being the owner of the trucks, would be eligible for the benefit of depreciation. Further, it was held by the Hon'ble Court that the lessee having not the right to transfer or alienate the vehicle to other parties in any form, the lease rent paid by the assessee in that case (lessee) would be revenue expenditure. In the case of Banashankari Medical & Oncology Research Centre Ltd. [2008 (8) TMI 346 - KARNATAKA HIGH COURT] had held that when equipments are not owned by the assessee, hire charges paid for leasing of the equipment is a revenue expenditure and is to be allowed as a deduction. As regards the CIT(A)'s directions to the A.O. to verify whether there was TDS made by the assessee while making payment for lease rentals and adding back the depreciation claim, the directions are to protect the interest of revenue. Therefore, the order of the CIT(A) is in accordance with law and we uphold the same.
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