AJAY KUMAR MITTAL,J. - (1.) THIS order shall dispose of ITA Nos.222 of 2004, 12 and 13 of 2005 and 924 of 2008 as learned counsel for the parties are agreed that identical facts and questions of law are involved in all these appeals. However, facts are being taken from ITA No.12 of 2005.
(2.) ITA No.12 of 2005 has been preferred by the revenue under section 260A of the Income Tax Act, 1961 (in short, "the Act") against the order dated 30.1.2004 passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'B', Chandigarh (for brevity, "the ITAT") in ITA No.826/Chandi/1998, for the assessment year 1994-95. It was admitted for determination of following substantial question of law:- "Whether the Tribunal was correct in law in holding that the value of a capital asset would be notionally enhanced due to foreign exchange fluctuation at the end of the each financial year and not at the time of payment during the year?" Briefly, the facts as narrated in ITA No.12 of 2005 may be noticed. For the assessment year 1994-95, the respondent-assessee filed its return of income on 30.11.1994 declaring total loss of Rs. 7,59,30,730.00. The assessee derived its income from manufacturing of Vanaspati, Textile, Solvent, Steel tube and cotton products. During the assessment proceedings, the Assessing Officer observed that the assessee had raised loans in foreign currency for the purchase of machinery. The amount of loan payable in the foreign currency had gone up due to fall in the value of Indian rupee. As a result, the assessee added the enhanced payment to the value of machinery and claimed depreciation thereon. The Assessing Officer rejected the claim vide order dated 21.3.1997, Annexure A.1 on the ground that the enhanced amount had not been paid and the assessee would be entitled to claim depreciation only when the additional liability of loan is actually paid. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 29.5.1998, Annexure A.2, the CIT(A) upheld the order passed by the Assessing Officer. However, on the request of the assessee, the CIT(A) rectified the order by referring to the provisions of section 43A of the Act, which was amended w.e.f 1.4.2003 by Finance Act, 2002 and allowed the claim of the assessee. Being unsatisfied with the order passed by the CIT(A), the revenue filed second appeal before the ITAT. Vide order dated 30.1.2004, Annexure A.3, the ITAT dismissed the appeal and upheld the order of the CIT(A) holding that the provisions of section 43A of the Act had been amended w.e.f 1.4.2003 whereas the order in question related to assessment year 1994-95. The ITAT confirmed the order of CIT(A) allowing the claim of depreciation on the enhanced cost of capital asset due to change in the value of Indian rupee. Hence this appeal by the revenue.
(3.) LEARNED counsel for the revenue submitted that unless the amount was actually paid on account of exchange rate fluctuation by the assessee, benefit of the same should not have been allowed to the assessee as has been done by the ITAT. Reliance was placed on Apex Court decisions in Commissioner of Income Tax v. Lucas T. V.S.Limited, (2008) 297 ITR 429, Assistant Commissioner of Income Tax v. Elecon Engineering Co. Limited, (2010) 322 ITR 20 and Karnataka High Court in Commissioner of Income Tax. v. Wipro Finance Limited, (2010) 325 ITR 672. It was submitted that Section 43A of the Act was amended by Finance Act, 2002 w.e.f 1.4.2003 which was clarificatory in nature and, therefore, the same was applicable to assessment years prior thereto as well.;