Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessee imported machinery from Germany against loan raised in foreign currency -Repayment of loan was to be made in foreign currency in instalments spread over a number of years - During relevant accounting year assessee had to repay excess amount of instalment on account of fluctuation in exchange rate and claimed such excess amount as a revenue deduction - Whether such amount could not be allowed revenue expenditure - Held, yes Section 80J of the Income-tax Act, 1961 - Deductions - Profits and gains from newly established industrial undertakings - Whether value of work-in-progress should not be excluded in computation of capital employed for purpose of determining amount of deduction allowable under section 80J - Held, yes Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance/Rate of - Whether pre-commissioning and other expenses incurred for process know-how form part of actual cost of assets for purposes of computing depreciation - Held, yes FACTS The assessee a public limited company carrying on business of manu-facture and sale of chemicals, imported machinery from Germany against a foreign currency loan from a German company. The loan was to be repaid in German currency in instalments spread over a number of years. During the relevant accounting year the assessee had to pay excess amount of instalment on account of fluctuation in the exchange rate, and claimed the said excess sum as a revenue deduction. The ITO, however, rejected the claim on the ground that it was a capital expenditure. Further in computing the capital employed for the purpose of ascertaining the deduction permissible under section 80J, the ITO excluded from the aggregate value of the assets the value of the work-in-progress. The ITO also rejected the assessee's claim for inclusion of the pre-commissioning expenses and the payment made for the process know-how in the total cost of the assets in computing depreciation permissible under section 32. On appeal, the AAC accepted all the contentions of the assessee. On further appeal by the revenue, the Tribunal rejected the assessee's claim for…

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