TaxTMI 
TaxTMI 
2002 (2) TMI 305
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.... "that the learned DCIT's observation that the 'appellant has not yet suffered any loss, since no repayment of the foreign loan has yet been made, is wrong. She ought to have considered the fact that the appellant's loss on account of devaluation was determined during the year under appeal only and hence, following the Accounting Standards (AS 11), she ought to have allowed depreciation and Investment Allowance on the enhanced capitalised value of the Plant & Machinery'. 3. From the grounds raised and the arguments advanced, the only issue arising in this appeal is in relation to allowance of depreciation and investment allowance on the enhanced cost due to additional liability incurred for purchase of plant and machinery due to fluctuati....
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....(Mad.). 4. Widia (India) Ltd v.Chief CIT [1998] 233 ITR 1(Kar.). She, thereafter, argued that since the issue on hand is fully covered by the decision of the Hon'ble Karnataka High Court, the appeal of the assessee needs to be allowed. 7. The learned departmental representative argued that the repayment of the loan is rescheduled and hence no part of the loan is repayable during the year. The liability which is required to be discharged at a future date, increase in the liability due to fluctuation in the foreign exchange rate depends upon the exchange rate prevailing at the time of repayment and hence contingent in nature. The CIT(A), was, therefore, justified in dismissing the appeal of the assessee. We have given our considered though....
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....ce thereon. We shall first discuss the impact of such addition to the cost of assets on the depreciation allowances thereon. Section 43(A), as introduced in the St. book w.e.f 1-4-1967 provides that the liability of such a nature shall be added to the actual cost of asset as defined in section 43(1) of the Income-tax Act, 1961. The depreciation under section 32 is to be allowed with reference to the actual cost. The actual cost for this purpose is defined under section 43(1) of the Act. 11. It therefore, follows that when the actual cost defined in section 43(1) is to be increased by the additional liability due to fluctuation in the foreign exchange rate in respect of loans taken in foreign currency, the depreciation is also required to b....
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....or the assessee has heavily relied upon the decision of the Hon'ble Karnataka High Court in Widia (India) Ltd.'s case The question posed before the Hon'ble Karnataka High Court read as under:-- "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in allowing investment allowance on the enhanced cost of assets due to fluctuations in foreign currency rates and accordingly directing the Income-tax Officer to recompute the investments allowance and grant the deductions?" The Hon'ble Karnataka High Court held by simply stating as under:- "The first question is covered by the decision of this court in CIT v. Motor Industries Co. Ltd. [1988] 173 ITR 374. Following the said decision, the first quest....
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....e section and the Explanation it follows that the investment allowance is granted as a one time allowance at the specified percentage on the cost of plant and machinery acquired or first put to use. The same is not repetitive in nature like depreciation. 16. Section 43 starts with the words "in sections 28 to 41 and in the section unless the context otherwise requires actual cost means......... The Explanation to section 32A(B)(1) defines what is the actual cost for the purpose of granting of investment allowance under section 32A. Section 43(A) requires the additional liability incurred due to fluctuation in the foreign exchange rate in respect of the loan taken for acquiring any assets to be incurred in the actual cost for the purpose o....