- (1.) The appeal arises out of a judgment and order dated 30th June, 2006 passed by the learned Income Tax Appellate Tribunal pertaining to the assessment year 2002-2003. The revenue has come up in appeal. The following questions were formulated at the time of admission of the appeal:-- "1. Whether on the facts and in the circumstances of the case the learned Tribunal has erred by allowing deduction under Section 80-IA to the extent of Rs. 44,71,14,992/- when the fundamental requirements to quality for claim of deduction under Section 80-IA is deficient in this case as the power generation unit is only the extension of existing business of the assessee and there was no business activity on the part of the undertaking (power generation) because the product (power) being generated by the plant was transferred to its own industrial units and was not sold at the market rate to the assessee ?" 2. Whether on the facts and in the circumstances of the case the learned Tribunal has erred in deleting the addition of Rs. 12,40,533/- on account of depreciation on capitalization of foreign gain/loss when the intermediate fluctuation in the rates of foreign exchange does not necessarily enhance the actual cost of the depreciable assets and the stand taken by the Department on this matter has always been that any increase in the cost of assets due to any intermediate cost of rates of foreign currency shall not be entitled for depreciation as in such cases no real and tangible increase in the cost of assets take place? 3. Whether on the facts and in the circumstances of the case the learned Tribunal has erred in deleting the addition of Rs. 21,88,113/- on account of depreciation on forklift trucks by allowing depreciation @ 100/- without appreciating the fact that the said trucks are not energy saving devices and do not fall within the meaning of item No. III(xiii)(o) of Appendix I of Income Tax Rules 1962? 4. Whether on the facts and in the circumstances of the case the learned Tribunal has erred in deleting addition of Rs. 25,26,811/- made on account of advances written off by treating it as revenue in nature when the figure included deposits made with government bodies, advances to various employees, refund claim with Excise Authorities, etc. which are not strictly in the nature of debit and nor have the same ever been offered for taxation in earlier years meaning thereby these advances are not part of taxable income?" The facts and circumstances pertaining to the question No. 2 appearing from the submissions advanced before the CIT (Appeals) on behalf of the assessee are as follows:-- "There have been no provisions made for forex fluctuations. The entire amount of forex fluctuation of Rs. 49,62,133/- was on account of actual expenditure on account of cancellation/booking of foreign exchange covers, during the year. Extract of the assessment submission enclosed - Annexure 32, File No. 1, Page Nos. 307. This was certified by the auditors in the Tax Audit Report. Therefore, there is absolutely no income tax issue since this has not been claimed as revenue expenditure but has actually been capitalized in accordance with section 43A and only depreciation has been claimed"
(2.) It would, therefore, appear from the submissions advanced by the assessee himself that the claim could not have come within the four corner of Section 43A. Therefore, the claim for depreciation was altogether bad and illegal. The assessee did not incur any loss arising out of fluctuations in the exchange price. The assessee, on the contrary, claims to have incurred the expenditure of a sum of Rs. 49,62,133/- because it had got to get rid of the forward contracts which it had entered into for the purpose of protecting itself from the fluctuations of the foreign exchange.
(3.) Therefore, the assessee might have claimed it as an expenditure which could have been considered in accordance with law. But there was no case for any claim being put forward on account of depreciation.;