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TMI Blog2012 (6) TMI 680X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, that the written down value in the year in which the increased liability has arisen should be taken on the basis of the increased cost minus depreciation earlier allowed on the basis of the old cost - in favour of assessee. Loss on fluctuation of foreign currency in respect of development cost u/s 42 - AO has considered the claim of the assessee u/s 42(1)(a) whereas the claim falls under section 42(1)(b)by assessee - Held that:- Section 42(1)(b) entitles the assessee to deduction after the beginning of the commercial production and the case of the assessee is that it was working in consortium, however necessary details could not be placed to show that the assessee had commenced production - set aside this issue to the record of the CIT(A) for deciding the issue afresh in terms of the directions of the Tribunal in the earlier year - in favour of assessee by way of remand. Treatment of interest income as income from other sources claimed by the assessee for the purpose of deduction u/s 80IB(9)- department treated it as business income - Held that:- As the deduction u/s 80IB(9) is not available to the interest received from bank deposits as the receipt of interest does not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds: 1) The CIT erred in holding that the loss on fluctuation of foreign currency for the year ended 31 March 2002 of Rs. 1,68,004 cannot be capitalised under section 43A of the Income-tax Act, 1961 ( the Act ) as the asset (Sub-sea Equipment) did not exist in the Block of Assets. The CIT further erred in denying the Appellant deduction of deprecation 100% under section 32 of the Act with respect to the addition made to Sub-sea Equipment of the loss of fluctuation of foreign currency of Rs. 1,68,004. 2) The CIT erred in holding that the loss on fluctuation of foreign currency of Rs.61,54,496 is not allowable under section 42 of the Act as the said loss is not with respect to expenditure specified under section 42(1 )(a) of the Act. 3. Ground no.1 is regarding depreciation on loss due to fluctuation of foreign exchange and capitalization u/s 43A of the I T Act. 4. We have heard the ld AR of the assessee as well as the ld DR and considered the relevant material on record. At the outset, we note that an identical issue has been considered and adjudicated by the Tribunal in assessee s own case for the AY 2000-01 in ITA No.5569/Del/03 vie order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rusal of this section reveals that if there is a change in the rate of foreign exchange after the acquisition of assets, as a result of which there is an increase or reduction in the liability of the assessee as expressed in the Indian currency, then such increase or reduction shall be added to or deducted from the actual cost of the asset and after giving effect to this adjustment the actual cost of the assets shall stand substituted with the new figure. There is no dispute about the fact that the assessee borrowed the money from Barclays Bank for the purchase of the equipment. Even though 100% depreciation was allowed in first year itself as per the relevant rules, liability towards repayment of the loan continued and is still continuing in the year in question. Albeit the assessee had claimed l00% depreciation on the amount yet the asset is continuing with the assessee and the Revenue has not denied that it was not utilized for the purpose of its business in the year in question. The provisions of section 43A are crystal clear in the sense that it is mandatory for the assessee to compute actual cost of the asset in the light of increase or decrease in the liability due to exchan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... score and order for the inclusion of the amount of Rs. 12,37 Iakhs in the cost of asset uls.43A and then allowing the depreciation u/s.32 for the equal amount. 5. Since the facts and issues are identical in the AY 2000-01 and in the year under consideration; therefore, following the earlier order of the Tribunal in assessee s own case, we decide this issue in favour of the assessee. 6. The second issue is regarding loss on fluctuation of foreign currency in respect of development cost u/s 42 of the I T Act. 7. We have heard the ld AR of the assessee as well as the ld DR and considered the relevant material on record. The ld AR has pointed out that this issue was also considered in the AY 2000-01 (supra). The ld AR has further pointed out that the Assessing Officer has considered the claim of the assessee u/s 42(1)(a) whereas the claim falls under section 42(1)(b). The ld DR on the other hand, relied upon the orders of the authorities below. 8. After considering the rival contention and relevant material on record, we find that the Tribunal in assessee s own case for the AY 2000-01(supra) has considered and adjudicated an identical issue in para 6 7 as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... securing a foreign currency loan, was to be considered as Interest from Other Sources and not Business Income . 4) The CIT(A) erred in not giving directions to the Assistant Commissioner of Income- tax-Circle 2(3) ( Assessing Officer ) for setting off brought forward losses and unabsorbed depreciation against the business profit determined by the Assessing Officer. 11. At the time of hearing, the ld AR of the assessee has submitted that in view of the retrospective amendment of provisions of sec. 80IB(9), the assessee does not press the ground nos 1 2 and the same may be dismissed as not pressed. 11.1 The ld DR has no objection, if the ground nos 1 2 of the assessee s appeal are dismissed as requested. 11.2 Accordingly, ground nos 1 2 of the assessee s appeal are dismissed being not pressed. 12. Ground no.3 is regarding treating the interest income as income from other sources instead of business income claimed by the assessee for the purpose of deduction u/s 80IB(9). 13. We have heard the ld AR of the assessee as well as the ld DR and considered the relevant material on record. The ld AR of the assessee has submitted that this issue ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order (supra), that the Tribunal has allowed this claim of the assessee on the principles of consistency because for the AY 1999-00, 2000-01 and 2002-03, the revenue has not filed any appeal against the order of the CIT(A). The Hon ble High Court has dismissed the appeal of the revenue for AY 2003-04 by observing as under: 2. Admittedly, similar interest earned by the Assessee for AY 1999-2000 to 2002-02003 have been assessed as business income and the said orders have attained finality. In this view of the matter, the order passed by the ITAT cannot be faulted. Accordingly, the appeal is dismissed with no other. 17. It is to be noted that at the time of deciding the appeal for the earlier year, the benefit of the decision of the Hon ble Supreme Court in the case of Liberty India was not available before the Tribunal. Therefore, the principles of consistency cannot be applied for the year under consideration when the CIT(A) has disallowed the claim of the assessee. In the case of Pandian Chemicals Ltd vs CIT reported in 262 ITR 278(SC) , the Hon ble Supreme Court has observed as under: The word derived has been construed as far back in 1948 by the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il and is eligible for deduction u/s 80IB. ii) The CIT(A) erred in treating the provisions for site restoration expenses as ascertained liability. 21. Ground no.1 is regarding eligibility of deduction/s 80IB on extraction of oil from oil field. 21.1 The dispute is on the point whether the extraction of oil from oil field is production of mineral oil as contemplated u/s 80IB(a) or not. 22. We have heard the ld DR as well as the ld AR and considered the relevant material on record. The ld AR has pointed out that in the case of the other partner in the consortium i.e. M/s Hindustan Oil Exploration Co Ltd in ITA No.179/Mum/2007 dated 28th Dec 2012 an identical issue was considered and decided by the Tribunal in favour of the assessee. The ld DR has not disputed the factual position that M/s Hindustan Oil Exploration Co Ltd is one of the parties of the consortium for extraction of oil from the same oil field. Therefore, in view of this fact, we find that an identical issue has been considered and adjudicated by the coordinate Bench of the Tribunal in the case of M/s Hindustan Oil Exploration Co Ltd (supra) and one of us Judicial Member is the party to the said o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious process would involve production within the meaning of sec 32A(2)((b)(iii) of the I T Act and consequently, the assessee was entitled to the benefit of investment allowance under sec. 32A. The view expressed by the High Court that the activity of extraction and processing of iron ore constitute production has been affirmed by the Hon ble Supreme Court. It was held by the Hon ble Supreme Court that the word production has a wider connotation than the word manufacture. It was further observed that every manufacturer can be characterised as production, every production need not amount to manufacture. 23. Accordingly, by following the order of the Tribunal (supra) we decide this issue in favour of the assessee and against the revenue. The order of the CIT(A), qua this issue is upheld. 24. Next issue is regarding treating the provision of site restoration expenses as ascertain liability while computing the book profit u/s 115JB of the Act. 25. We have heard the ld DR as well as the ld DR and considered the relevant material on record. During the year, the assessee debited an amount of Rs. 2,20,96,256/- being site restoration fund to its P L account. The Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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