Commissioner of Income Tax Vs Gujarat Guardian Ltd.

@JUDGMENTTAG-ORDER

1. The revenue has raised two issues in this appeal. The first issue pertains to engineering service fee paid by the assessee for setting up of its plant. The question is whether the assessee is entitled to depreciation u/s 32 of the income tax Act, 1961 or whether the assessee is entitled to amortise the expenses u/s 35AB of the Act being expenditure on know-how. In view of our judgment in CIT v. Gujarat Guardina Ltd. [2007] 306 ITR 320 (Del) no substantial question of law arises in this regard.

2. The second issue raised is with regard to fluctuation in the rate of foreign exchange and its effect.

3. We admit the appeal in respect of the second issue and frame the following substantial question of aw:-

Whether the income tax Appellate Tribunal was correct in law in allowing depreciation to the assessee on notional increase in the cost of plant and machinery due to fluctuation in the foreign exchange rate on the last date of the accounting year?

4. The admitted position is that in view of the decision of this Court in Commissioner of Income Tax Vs. Woodward Governor India Pvt. Ltd., , the question is required to be answered in the affirmative in favour of the assessee and against the revenue. The appeal is disposed of in the above terms.