TMI Blog2018 (5) TMI 2135X X X X Extracts X X X X X X X X Extracts X X X X ..... etation placed on the provisions of Section 32(1)(iia) of the Act and therefore direct he AO to allow the appellant benefit of additional depreciation in relation to actual cost of plant and machineries installed in AY 2011-12 but put to use for period less than 180 days - Ground is therefore allowed. Revenue s appeal is dismissed. - ITA No. 891/Kol/2017 - - - Dated:- 31-5-2018 - Shri S.S. Godara, Judicial Member And Dr. A.L. Saini, Accountant Member For the Appellant : Shri S. Dasgupta Addl. CIT-DR. For the Respondent : Shri D.S. Damle, FCA. ORDER PER S.S. Godara, Judicial Member:- This Revenue s appeal for assessment year 2012-13 arises against the Commissioner of Income Tax (Appeals)-4, Kolkata s order dated 17.02.2017, in case No.243/CIT(A)-4/Cir-12(1)/Kol/16-17, reversing Assessing Officer s action inter alia disallowing / adding market to market loss and additional depreciation claim of ₹449.18 lakh and ₹55,13,634/-; respectively involving proceedings u/s 143(3) of the Income Tax Act; in short the Act . Heard both the parties reiterating their respective stands. Case file perused. 2. We come to Revenue s former substantive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear the company s export earning in convertible foreign exchange amounted to Rs.258,599.24 lacs. It will thus be appreciated that the appellant had substantial exposure to international trade which was conducted in foreign currency terms. As such the appellant was highly exposed to the risks arising from exchange rate fluctuations. In the circumstances to hedge against exchange fluctuation risks in relation to its international trading operations, the appellant had entered into foreign exchange denominated forward contracts with bank. The ICAI has recommended the Accounting Standard for accounting of derivative and/or forward contracts in terms of which the persons entering into foreign exchange forward contracts to hedge their exchange fluctuation risk are required to state the outstanding positions at the exchange rates prevailing on the Balance Sheet date and make provision for anticipated losses arising on account of foreign exchange fluctuation. The ICAI relying on the principle of prudence has recommended that the entities and enterprises who follow mercantile system of accounting should evaluate derivatives contract on the basis of exchange rate prevailing on the Balance She ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is prayed that disallowance of Rs.449.18 lacs be directed to be deleted. 4.2 I have carefully considered the submissions of the AR and have perused the details of such loss. This issue with regard to allowability of market-tomarket loss arising out of restatement of foreign exchange liabilities has been decided by the Apex Court in the case of CUIT vs. Woodward Governor India (P) Ltd (312 ITR 154) and ONGC vs. CUIT (322 ITR 180). In these decisions the Apex Court has held that the loss incurred on restatement of foreign currency liabilities in conformity with exchange rate prevailing on the balance sheet date is not a contingent liability but defined and ascertained liability and therefore the loss incurred on restatement is liable to be allowed in the case of an assessee who follow the mercantile system of account. Further such loss allowable if the underlying asset or underlying liability is incurred on trading account. In the appellant s case, it had entered into foreign exchange forward contracts for hedging exchange fluctuation risks in respect of export orders. As such the underlying transaction in relation to forward contract entered into by the assessee was trading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less than 180 days in that year, amounting to ₹55,13,634/-. The AO required the appellant to explain as to why such remaining 50% of the additional depreciation should be allowed. In response the appellant filed an explanation along with copies of the appellate orders of CIT(A) s of earlier years wherein identical claims were allowed. Apart from the foregoing the appellant also placed reliance on the decisions of coordinate Benches of Tribunal. The AO however did not agree with the contention of the appellant. According to Assessing Officer the foremost condition to claim additional depreciation was that the plant machinery should be new and since the plant machinery in question had been put to use in earlier year, the appellant could not avail the benefit of additional depreciation u/s. 32(1)(iia) of the Act. the AO further referring to second proviso to Section 32(1)(iia) held that it only restricts the claim of additional depreciation to 50% in respect of new assets put to use for less than 180 days and the is no such provision allowing the assessee to claim remaining 50% in the succeeding year. For these reasons, the AO held that the claim of additional depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in conformity with the condition prescribed in the relevant provision of the Act. The AO further noted that even though on the same issue the appellant s claim was allowed by CIT(A) the Revenue had filed appeal before the ITAT and as such the matter was sub judice. Following his predecessor s orders for earlier year therefore the AO disallowed the assessee s claim for 10% of the additional depreciation claimed in relation to actual cost of the assets which were put to use for less than 180 days in AY 2011-12. In this regard the appellant submit that the initial depreciation under clause (iia) is allowed as an incentive to encourage investments in new plant machinery. The condition precedent for allowing such deduction is acquisition and installation of new plant machinery in the manufacturing business. Once the conditions prescribed in clause (iia) are fulfilled the assessee becomes eligible to claim additional depreciation @ 20%. There is nothing in the language employed in clause (iia) which suggests that such deduction is required to be allowed only in the year in which the machinery is installed and first put to use. The language of clause (iia) shows that the ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than 180 days in that year. It is also relevant to submit that the appellant made identical claims in the earlier years as well which was disallowed by the AO but on appeal your predecessors in the appellate orders passed for AYs 2007-08 to 2010-11 deleted the same. Furthermore the Hon'ble ITAT, Kolkata in the ITA No.1364/Kol/2013 dated 08.07.2016 has upheld the order of the CIT(Appeals) for AY 2007-08. Copies of the relevant appellate orders are enclosed. Since the factual martix of the assessee s case is identical in AY 2012-13 it is prayed that the AO be directed to allow the deduction of additional depreciation for Rs.55,13,564/-. 6.2 I have carefully considered the AR s submissions and perused the applicability of legal provisions. I find that the issue at hand involved in this ground is covered in assessee s favour by the appellate order of the hon'ble ITAT, Kolkata in appellant s own case for AY 2007-08 and also the appellate orders passed by my predecessors for AYs 2008-09 2009-10. Apart from the foregoing, impugned order further note that the interpretation of Section 32(1)(iia) by the judicial authorities has also been accepted by the Legislature when pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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