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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI V. DURGA RAO & SHRI G. MANJUNATHA
PER G. MANJUNATHA, AM:
This appeal filed by the assessee is directed against
order of the learned Commissioner of Income Tax (Appeals)-
1, Chennai, dated 30.01.2019 and pertains to assessment
year 2010-11.
The assessee has raised following grounds of appeal:-
“1. The Learned AO and the commissioner (Appeals) erred in denying the additional depreciation on the exchange rate fluctuation loss on new Plant and Machinery purchased during the earlier year. 2. The Learned AO and the Commissioner (Appeals) erred in ignoring the alternative claim of the appellant for
ITA No. 1151/Chny/2019 adding the subject forex loss to the block of assets for the purpose of claiming tax depreciation.”
Brief facts of the case are that the assessee company is
engaged in the manufacture of automobile components filed its
return of income for the assessment year 2010-11 on
06.10.2010 admitting total income of Rs. Nil. During financial
year relevant to assessment year 2010-11, the assessee
company claimed additional depreciation @ 20%
u/s.32(1)(iia) of the Act, in respect of new plant and machinery
purchased and put to use. As per facts brought on record by
the Assessing Officer, the assessee claims to have purchased
new plant and machinery amounting to Rs,15,14,14,515/-,
which includes a sum of Rs.3,16,52,752/- being value of
exchange rate fluctuation loss on plant and machinery
purchased during earlier years prior to financial year 2009-10
and capitalized u/s.43A of the Act. The Assessing Officer has
allowed depreciation on new plant & machinery acquired and
installed during the year, however, rejected additional
depreciation claimed on capitalization of exchange loss on
plant & machinery purchased and installed during the earlier
period. The assessee carried the matter in appeal before the
ITA No. 1151/Chny/2019 first appellate authority, but could not succeed. The learned
CIT(A), for the reasons stated in his appellate order dated
30.11.2019 rejected arguments of the assessee and
sustained additions made by the Assessing Officer towards
additional depreciation claimed on capitalization of forex loss
incurred on plant & machinery acquired and installed during
earlier financial years. Aggrieved by the learned CIT(A) order,
the assessee is in appeal before us.
The learned A.R. for the assessee submitted that the
learned CIT(A) erred in denying additional depreciation on
exchange rate fluctuation loss on new plant & machinery
purchased during the earlier year, even though, as per
provisions of section 43A of the Act, the assessee can
capitalize exchange loss incurred on plant & machinery
purchased from outside India. The learned A.R. for the
assessee further referring to provisions of section 32(1)(iia) of
the Act, submitted that as per said provisions, the assessee
can claim additional depreciation on plant & machinery
acquired and installed, if certain conditions are satisfied. In
this case, the assessee has satisfied conditions prescribed
ITA No. 1151/Chny/2019 u/s.32(1)(iia) of the Act, and claimed depreciation @ 20%on
new plant &machinery acquired and installed during the
previous year. The Assessing Officer as well as the learned
CIT(A) without appreciating facts has rejected claim of the
assessee.
The learned D.R., on the other hand, supporting order of
the learned CIT(A) submitted that as per provisions of section
32(1)(iia) of the Act, an assesseee can claim additional
depreciation in case any new plant & machinery was
purchased and installed. In this case, the assessee has
claimed additional depreciation on forex loss incurred for
acquiring plant & machinery during earlier financial years and
thus, the Assessing Officer has rightly disallowed additional
depreciation and his order should be upheld.
We have heard both the parties, perused material
available on record and gone through orders of the authorities
below. There is no dispute with regard to fact that as per
provisions of section 32(1)(iia) of the Act, in case of any new
plant & machinery which has been acquired and installed after 31st day of March, 2005, by an assessee engaged in the
ITA No. 1151/Chny/2019 business of manufacture or production of any article or thing, a
further sum equal to 20% of actual cost of such plant shall be
allowed as deduction. From plain reading of above provisions,
it is very clear that an eligible assessee can claim additional
depreciation @ 20% on new plant & machinery purchased and
installed during the year of purchase and installation of said
plant & machinery. In this case, there is no dispute with regard
to fact that the assessee has purchased new plant &
machinery prior to financial year 2009-10 relevant to the
assessment year 2010-11. The assessee had claimed
additional depreciation contemplated u/s.32(1)(iia) of the Act,
in subsequent financial year on capitalized value of forex loss
incurred on plant & machinery purchased during earlier
financial year. According to the assessee, loss incurred on
foreign fluctuation loss incurred for acquisition of plant &
machinery should be capitalized to cost of asset as per
provisions of section 43A of the Act, and once loss incurred by
the assessee goes to increase W.D.V of new plant &
machinery, then, the assessee is entitled for additional
depreciation as per provisions of section 32(1)(iia) of the Act.
ITA No. 1151/Chny/2019 7. We have gone through reasons given by the Assessing
Officer to reject additional depreciation on capitalization of
forex loss in light of provisions of section 32(1)(iia) of the Act,
and we ourselves do not subscribe to the arguments advanced
by the learned counsel for the assessee for simple reason that
as per plain reading of section 32(1)(iia) of the Act, additional
depreciation is allowed to an assessee, in case, any new plant & machinery which has been acquired and installed after 31st
day of March, 2005 by an assessee engaged in the business
of manufacture or production of any article or thing in the year
of acquisition of said additional plant and machinery. In this
case, the assessee has claimed additional depreciation as per
provisions of section 32(1)(iia) of the Act, on capitalized value
of forex loss incurred on acquisition of plant & machinery
during earlier financial years by taking clue from provisions of
section 43A of the Act. In our considered view, arguments of
the assessee is misplaced, because as per provisions of
section 32(1)(iia) of the Act, the assessee is entitled for
additional depreciation only in the year of acquisition and
installation of new plant & machinery, but not for subsequent
financial years. Although, provisions of section 43A of the Act
ITA No. 1151/Chny/2019 allows capitalization of forex loss incurred on acquisition of
plant & machinery outside India to cost of assets, but said
additional cost can only be eligible for normal depreciation as
per provisions of section 32(1) of the Act, but not for additional
depreciation as contemplated under section 32(1)(iia) of the
Act. Therefore, we are of the considered view that the
assessee is not entitled for additional depreciation on
capitalized portion of forex loss incurred on plant & machinery
acquired and installed during earlier financial year for the
impugned assessment year. The Assessing Officer as well as
the learned CIT(A), after considering relevant facts has rightly
rejected additional depreciation claimed on capitalized portion
of forex loss. Hence, we are inclined to uphold findings of the
learned CIT(A) and dismiss appeal filed by the assessee.
In the result, appeal filed by the assessee is dismissed.
Order pronounced in the open court on 13th July, 2022 Sd/- Sd/- (वी. दुगा� राव) (जी. मंजुनाथ) (V.Durga Rao) (G.Manjunatha) �या�यक सद�य /Judicial Member लेखा सद�य / Accountant Member चे#नई/Chennai, $दनांक/Dated 13th July, 2022 DS
ITA No. 1151/Chny/2019 आदेशक��&त'ल(पअ)े(षत/Copy to: 3. आयकर आयु*त (अपील)/CIT(A) Appellant 2. Respondent 4. आयकरआयु*त/CIT 5. (वभागीय�&त&न.ध/DR 6. गाड1फाईल/GF.