Claim for additional depreciation on capitalized portion of forex loss for plant and machinery: ITAT dismisses appeal of Daeseung Autoparts [Read Order]

Income Tax Appellate Tribunal (ITAT), Chennai bench consisting of V Dura Rao, Judicial Member and G Manjunatha, Accountant Member dismissed the appeal filed by M/s. Daeseung Autoparts India Pvt. Ltd on the claim for additional depreciation on capitalized portion of forex loss for plant and machinery.

The assessee company, M/s. Daeseung Autoparts India Pvt. Ltd is engaged in the manufacture of automobile components filed its return of income for the assessment year 2010-11 on 06.10.2010 admitting total income of Rs. Nil. During financial year relevant to assessment year 2010-11, the assessee company claimed additional depreciation at 20% u/s.32(1) (iia) of the Act, in respect of new plant and machinery purchased and put to use. Before the Assessing Officer, the assessee claims to have purchased new plant and machinery amounting to Rs,15,14,14,515/-, which includes a sum of Rs.3,16,52,752/- being value of exchange rate fluctuation loss on plant and machinery purchased during earlier years prior to financial year 2009-10 and capitalized u/s.43A of the Act.

The Assessing Officer has allowed depreciation on new plant and machinery acquired and installed during the year, however, rejected additional depreciation claimed on capitalization of exchange loss on plant & machinery purchased and installed during the earlier period. The assessee carried the matter in appeal before the first appellate authority, but could not succeed. The CIT(A), for the reasons stated in his appellate order dated 30.11.2019 rejected arguments of the assessee and sustained additions made by the Assessing Officer towards additional depreciation claimed on capitalization of forex loss incurred on plant and machinery acquired and installed during earlier financial years. Aggrieved by the CIT(A) order, the assessee is in appeal before the Tribunal.

The Tribunal observed that “Arguments of the assessee is misplaced, because as per provisions of section 32(1) (iia) of the Act, the assessee is entitled for additional depreciation only in the year of acquisition and installation of new plant & machinery, but not for subsequent financial years. Although, provisions of section 43A of the Act allows capitalization of forex loss incurred on acquisition of plant & machinery outside India to cost of assets, but said additional cost can only be eligible for normal depreciation as per provisions of section 32(1) of the Act, but not for additional depreciation as contemplated under section 32(1) (iia) of the Act. Hence, dismiss appeal filed by the assessee.”

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