INCOME TAX ACT, 1961

Section 32

Depreciation - Depreciation on assets on exchange fluctuation - AO disallowed the excess depreciation claimed by assessee -

Assessee was engaged in the business of manufacturing of cables, wires, stainless steel wires and turnkey projects. AO found that the assessee was captilising exchange-rate fluctuation in respect of the missionary but in India from the foreign funds raised through FCCBs ECB's/BUYER'S credit, repayment of these loans was not made in that year but the assessee has raised an extra-liability on account of prevailing exchange rate as on 31-3-2012 and during the financial year 2012-13 the assessee allocated foreign exchange fluctuation loss to fix it assets accordingly and claimed extra depreciation on account of this capitalisation. However, AO disallowed the excess depreciation. Held: Where long term foreign currency monetary items relates to acquisition of depreciable capital asset, the same shall be added/deducted from the cost of the asset and shall be depreciated accordingly over the balance life of the asset. Consistent view taken by the Tribunal in assessee's own case for the assessment years 2009-10 and 2012-13 goes in favour of the assessee and in the absence of any change is in the facts are in law, it was difficult to deviate from the same or to take a different view. Therefore, authorities were directed to delete the disallowance of excess depreciation.

Followed:CIT v. Excel Industries Ltd. (2013) 358 ITR 295 (SC) : 2013 TaxPub(DT) 2414 (SC) and Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC) : 1992 TaxPub(DT) 858 (SC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14

INCOME TAX ACT, 1961

Section 14A

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