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2015 (6) TMI 102 - CALCUTTA HIGH COURT

2015 (6) TMI 102 - CALCUTTA HIGH COURT - TMI - Eligibility of deduction under Section 80IA - Tribunal allowed the claim - whether the generation unit is only the extension of existing business of the assessee and there was no business activity on the part of the undertaking (power generation) because? - Held that:- As regards the first question, Mr. Khaitan, learned Senior Advocate wanted to file a written notes of submissions. We have, therefore, reserved our judgment on the first question, whi .....

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f Section 43A. Therefore, the claim for depreciation was altogether bad and illegal. The assessee did not incur any loss arising out of fluctuations in the exchange price. The assessee, on the contrary, claims to have incurred the expenditure of a sum of ₹ 49,62,133/- because it had got to get rid of the forward contracts which it had entered into for the purpose of protecting itself from the fluctuations of the foreign exchange.Therefore, the assessee might have claimed it as an expenditu .....

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d in the negative and against the revenue.

Addition on account of advances written off by treating it as revenue in nature - Tribunal deleted the addition - Held that:- The fact that the advances were made for purchasing the raw material made it an expenditure of a revenue character and, therefore, that was deductible. In the case before us the finding of fact is that the expenditure was incidental to the business. Therefore, the expenditure partook the character of revenue expenditur .....

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The Revenue has come up in appeal. The following questions were formulated at the time of admission of the appeal:- "1. Whether on the facts and in the circumstances of the case the learned Tribunal has erred by allowing deduction under Section 80IA to the extent of ₹ 44,71,14,992/- when the fundamental requirements to quality for claim of deduction under Section 80IA is deficient in this case as the power generation unit is only the extension of existing business of the assessee and .....

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reign exchange does not necessarily enhance the actual cost of the depreciable assests and the stand taken by the Department on this matter has always been that any increase in the cost of assets due to any intermediate cost of rates of foreign currency shall not be entitled for depreciation as in such cases no real and tangible increase in the cost of assets take place ? 3. Whether on the facts and in the circumstances of the case the learned Tribunal has erred in deleting the addition of ͅ .....

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e included deposits made with government bodies, advances to various employees, refund claim with Excise Authorities, etc. which are not strictly in the nature of debit and nor have the same ever been offered for taxation in earlier years meaning thereby these advances are not part of taxable income ?" The facts and circumstances pertaining to the question no.2 appearing from the submissions advanced before the CIT (Appeals) on behalf of the assessee are as follows:- "There have been n .....

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alized in accordance with section 43A and only depreciation has been claimed" It would, therefore, appear from the submissions advanced by the assessee himself that the claim could not have come within the four corner of Section 43A. Therefore, the claim for depreciation was altogether bad and illegal. The assessee did not incur any loss arising out of fluctuations in the exchange price. The assessee, on the contrary, claims to have incurred the expenditure of a sum of ₹ 49,62,133/- b .....

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to the assessing officer. He shall consider the question, if the assessee wants to press the same, in accordance with law. In so far as the question no.3 is concerned, it appears that electrically operated vehicles including battery power or fuel cell powered vehicles are entitled to 100% depreciation under Appendix I, Part-A, Item III(3)(xiii)(o) of the Income Tax Rules, 1962. Therefore, the question is answered in the negative and against the revenue. In so far as the question no.4 is concern .....

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e Supreme Court in the case of CIT vs. Mysore Sugar Co. Ltd. (46 ITR 649) held that the write off of trade advances were allowable deduction u/s.28 of the Income Tax Act 1961 since such expenses were incurred in the normal course of business. The details of amount written off have been examined and it is observed that all the advances (now) written off by the appellant company were incidental to the business of the appellant and any loss due to non recovery should be allowable as deduction for t .....

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ritten off, relied on a judgment in the case of CIT v. Mysore Sugar Co. Ltd. wherein their Lordships held that:- " ……but the general scheme of the section is that profits or gains must be calculated after deducting outgoings reasonably attributable as business expenditure but so as not to deduct any portion of an expenditure of a capital nature. If an expenditure comes within any of the enumerated classes of allowances, the case can be considered under the appropriate class; b .....

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on revenue, one must consider the expenditure in relation to the business. Since all payments reduce capital in the ultimate analysis, one is apt to consider a loss as amounting to a loss of capital. But this is not true of all losses, because losses in the running of the business cannot be said to be of capital. The questions to consider in this connection are: for what was the money laid out? Was it to acquire an asset of an enduring nature for the benefit of the business, or was it an outgoi .....

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