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Section 43 in The Income Tax Act, 1961 [Entire Act]
Section 48 in The Income Tax Act, 1961 [Entire Act]
Section 50 in The Income Tax Act, 1961 [Entire Act]
The Finance Act, 2018
Section 2 in The Foreign Exchange Management Act, 1999 [Entire Act]
Commissioner Of Income Tax vs Woodward Governor India Pvt. Ltd. ... on 30 April, 2007
7. We have carefully considered the rival contentions. The brief facts of the
issue is that company has issued 10000 foreign currency convertible bonds
of 1000 US$ each for capital expenditure on expansion which resulted as on
31.03.2007 on a foreign exchange gain of Rs. 16968381/-. Similarly, for
other foreign exchange transactions assessee has incurred loss of Rs.
4757192/-. In view of this the net gain of Rs. 12211189/- was received and
same was capitalized to the carrying cost of the fixed assets. It was the
claim of the assessee that above treatment is in accordance with the
decision of the Hon'ble Supreme Court in CIT Vs. Woodword Governance
India Pvt. Ltd 312 ITR 254. The ld Assessing Officer has challenged the
treatment given by the assessee by capitalizing the foreign exchange to the
cost of capital holding that unless a asset has been acquired from the
country outside India the gain or loss cannot be adjusted to the carrying
cost of the asset. The ld AO has interpreted the section 43A of the Income
Tax Act dealing with special provision consequent to changes in rate of
exchange of currency for the above treatment. The ld CIT(A) confirmed the
above finding applying the provisions of section 43A of the Act holding that
adjustment to the actual cost of the assets on account of increase and
decrease in the liability of the assessee on foreign exchange fluctuation at
the time of making the payment shall be added to the cost of acquisition of a
capital asset. He further held that method of accounting employed by the
assessee is not relevant. Before us the assessee submitted that plant has
been imported during 2006-07 and for which FCCB Funds have been
utilized. The details of such fluctuation is also placed at Page 73 to 77 of the
paper book. At page No. 78 the assessee submitted the note on treatment in
foreign exchange fluctuation is also placed. Further the contradictory facts
are recorded in the orders of lower authorities about whether the
machinery is imported or not. Now the claim of the assessee needs to be
analyzed in view of the provision of section 43 A of the Act which provides
as under :-
The Income Tax Act, 1961
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