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2022 (12) TMI 103 - AT - Income Tax


Issues:
1. Initiation of re-assessment proceedings without satisfying conditions under Section 147.
2. Disallowance of depreciation on foreign exchange loss.
3. Entitlement to deduction under Section 2(28A) of the Income Tax Act.

Issue 1: Initiation of Re-assessment Proceedings
The appeal challenged the initiation of re-assessment proceedings by the AO under Section 147 without satisfying the conditions laid down in the said section. The appellant contended that the CIT(A) erred in confirming the initiation of re-assessment proceedings. The AO had re-assessed the income for the assessment year 2009-10 under Section 143(3) r.w.s. 147 of the Income Tax Act, 1961. The appellant argued that the conditions under Section 147 were not met by the AO, questioning the validity of the re-assessment.

Issue 2: Disallowance of Depreciation on Foreign Exchange Loss
The core issue revolved around the disallowance of depreciation claimed on a foreign exchange loss related to a foreign currency term loan availed for the purchase of windmills. The AO disallowed the depreciation claim on the foreign exchange loss, citing Section 43A of the IT Act, which mandates assets to be acquired outside India for depreciation benefits. The CIT(A) upheld the AO's decision. However, the appellant argued that the assets were purchased indigenously, making Section 43A inapplicable. The Tribunal agreed with the appellant, noting that since the windmills were purchased domestically and depreciation was claimed over several years, the appellant was entitled to the depreciation claim.

Issue 3: Entitlement to Deduction under Section 2(28A)
The appellant also raised the issue of entitlement to a deduction under Section 2(28A) of the Income Tax Act concerning the purchase of a capital asset. The appellant claimed that depreciation on the foreign exchange loss should be allowed as it was less than the deduction amount the appellant was entitled to in the computation of business income. The Tribunal, after considering the arguments and facts presented, allowed the appellant's claim for depreciation on the foreign exchange loss, leading to the allowance of the appeal.

In conclusion, the Tribunal allowed the appeal filed by the assessee, emphasizing the entitlement to claim depreciation on the foreign exchange loss due to the purchase of windmills domestically. The judgment highlighted the importance of correctly applying relevant sections of the Income Tax Act and ensuring that assessments are conducted in accordance with the law.

 

 

 

 

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