TMI Blog2022 (10) TMI 1044X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Apex Court in the above decision clearly held that section 43A which corresponds to para 10 of AS-11, particularly in the light of section 43(1) makes it not possible to adjustment of the carrying cost of the fixed assets acquired in foreign exchange. Though the DR produced the details of year wise CWIP, EDCP and capitalized machinery/equipment, it missed the attention of the DR that an amount is mentioned therein as capitalized machinery cost. When the foreign exchange earned during the year under consideration to the tune the assessee rightly reached the difference which occasioned solely because of the different methods followed for valuation of the plant and machinery under the provisions of Companies Act and differently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act by order dated 12/03/2015 by directing the learned Assessing Officer to re-visit the assessment and to take a fresh view. Subsequently, assessment under section 143(3) read with section 263 of the Act was complete by order dated 29/02/2016, where under the learned Assessing Officer made an addition of Rs. 46,88,015/- on account of disallowance of a part of depreciation by reducing the value of plant and machinery and Rs. 1,34,55,810/- on account of disallowance of higher rate of depreciation in respect of factory building. 3. In appeal, Ld. CIT(A) deleted the addition of Rs. 46,88,015/- but confirmed the addition of Rs. 1,34,55,810/-. Revenue, therefore, challenges the deletion of Rs. 46,88,015/- on account of disallowance of a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xman 326 (SC). 5. We have gone through the record in the light of the submissions made on either side. According to the learned Assessing Officer, there was no gain or loss on account of foreign exchange fluctuation and the difference of Rs. 5,97,96,117/- was the difference in the value of the assets, whereas according to the assessee, it occasioned due to the differential treatment given to the value of the plant and machinery, one in accordance with the Companies Act and the other in accordance with section 43A of the Act. Assessee demonstrated that insofar as the requirements of Companies Act are concerned, to reach the value of the plant and machinery as per books, the assessee accounted for the net foreign exchange gain of Rs. 6,11, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of foreign exchange gain while accounting for the value of assets. On a perusal of the details of year wise CWIP, EDCP and capitalized machinery and equipment, Ld. CIT(A) found that the assessee during the year has worked out the foreign exchange gain/loss for financial years ending 31/03/2007, 31/03/2008, 31/03/2009 and 31/03/2010 on notional basis on the entire outstanding basing on 31/03/2010 rate of exchange and accounted for net foreign exchange gain of Rs. 6,11,95,493/- and accordingly, made an adjustment in the books, but while computing the depreciation for the purpose of Income Tax Act, the actual gain of Rs. 13,99,375/- earned on the instalment repaid at the end of the year was reduced from the cost of assets as per provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the acquisition of asset in foreign currency. The section mandates that at any time there is change in the rate of exchange, the same may be given effect to by way of adjustment of the carrying cost of the fixed assets acquired in foreign currency. But for section 43A which corresponds to para 10 of AS-11 such adjustment in the carrying amount of the fixed assets was not possible, particularly in the light of section 43(1). The unamended section 43A nowhere required as condition precedent for making necessary adjustment in the carrying amount of the fixed asset that there should be actual payment of the increased/decreased liability as a consequence of the exchange variation. The words used in the unamended section 43A were for making ..... X X X X Extracts X X X X X X X X Extracts X X X X
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