TMI Blog2008 (1) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... w Delhi, in Income-tax Appeal No. 1821 of 2005; Income-tax Appeal No. 1823 of 2005 and Income-tax Appeal No. 1824 of 2005, relating to the assessment years 1999-2000, 2000-01 and 1998-99, respectively, whereby the depreciation on account of foreign exchange loss allowed to the assessee by the Commissioner of Income-tax (Appeals), Dehradun, vide his order dated February 11, 2005, is affirmed. 2. Heard learned counsel for the parties and perused the record. 3. Following are the substantial questions of law involved in these appeals: "In I. T. A. No. 74 of 2007: Whether the Income-tax Appellate Tribunal erred in law in upholding the decision of the Commissioner of Income-tax (Appeals) on the facts and circumstances of the case, in allowing foreign exchange loss of Rs. 11,58,44,887 under section 42 of the Income-tax Act, 1961, without appreciating the fact that the loss is only a book entry and no loss was incurred by the company/assessee? In I. T. A. No. 76 of 2007: Whether the Income-tax Appellate Tribunal erred in law in upholding the decision of the Commissioner of Income-tax (Appeals) on the facts and circumstances of the case, in allowing foreign exchange loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority of India Limited. The assessee-NRC admittedly borrows in US dollars and repays it in the same currency. On these facts, the Assessing Officers in the aforesaid assessment years took the view that the foreign exchange loss claimed by the assessee-NRC was notional and the same was not admissible to it as depreciation. The respondent-assessee-NRC preferred appeals against the orders of the Assessing Officers before the Commissioner of Income-tax (Appeals), Dehradun (for brevity "the CIT(A)"), who registered the same as Appeal No. 21/DDN/CIT(A)-II/2004-05 against the order passed by the Assessing Officer in respect of the assessment year 1990-2000; Appeal No. 22/DDN/ GET(A) -11/2004-05 against the order passed by the Assessing Officer in respect of the assessment year 1998-99 and Appeal No. 51/DDN/CIT(A)-II/ 2004-05 against the order passed by the Assessing Officer in respect of the assessment year 2000-01. After hearing the parties, the Commissioner of Income-tax (Appeals), Dehradun, allowed all the three appeals, accepting the assessee-NRC's claim of foreign exchange loss, vide his order dated February 11, 2005, in the three appeals, mentioned above. Aggrieved by the same t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets on which allowance for depreciation is admissible under section 32 : Provided that in relation to any agreement entered into after March 31, 1981, this clause shall have effect subject to the modification that the words and figures 'except assets on which allowance for depreciation is admissible under section 32' had been omitted; and (c) to the depletion of mineral oil in the mining area in respect of the assessment year relevant to the previous year in which commercial production is begun and for such succeeding year or years as may be specified in the agreement………. and such allowances shall be computed and made in the manner specified in the agreement, the other provisions of this Act being deemed for this purpose to have been modified to the extent necessary to give effect to the terms of the agreement. Explanation.— For the purposes of this section, 'mineral oil' includes petroleum and natural gas." 7. Now, we deem it proper to quote article 1.6.1 and 1.6.2 of the production sharing contract ("PSC") entered into between the parties, which provides accounting procedure. The same are being reproduced below: 1.6 Currency exchange rates 1.6.1 For transla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be deprived of the same. Discussion: 9. On behalf of the appellants/Revenue it is submitted that the decision of the Income-tax Appellate Tribunal, Delhi, in Oil and Natural Gas Corporation Ltd. v. Deputy CIT (Assessment) [2003] 261 ITR (AT) 1 (Delhi) [SB] relied on by the Commissioner of Income-tax (Appeals) in the impugned order dated February 11, 2005, has been set aside by this High Court, vide its judgment and order in CIT v. Oil and Natural Gas Corporation Ltd. [2008] 301 ITR 415 (Uttarakhand) (along with eight connected appeals). On that ground it is argued that the depreciation cannot be allowed unless there is actual loss to the assessee-NRC. We have gone through the aforesaid judgment and order passed by this court which interprets section 37 of the Income-tax Act, 1961, and in that case no repayment of loan claimed was found to have been made by the borrowing company in the relevant assessment year, and only in the account books it was shown as expenditure. In the case in hand, the facts are different and it is nobody's case that no expenditure had taken place in the relevant assessment years. The point of dispute is whether, on the expenditure made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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