The Income Tax Appellate Tribunal (ITAT), Mumbai ruled that Mahindra & Mahindra is entitled to depreciation on Capital Expenditure of exchange fluctuation loss.
The assessee, Mahindra & Mahindra is engaged in the business of manufacturing and sale of on-road automobiles, agricultural tractor implements, engine parts and accessories of motor vehicle rendering services, property development activity, financing, investment, and transport solutions.
The assessee submitted in the course of expanding operation bars or manufacturing activities, it had incurred expenditure on acquiring entities that are engaged in a similar business in India as well as overseas.
For this purpose, it had incurred expenditure such as professional fees to legal charges, due diligence fees, etc., and claimed the same as revenue in nature. The AO treated the said incurrence of such expenditure as capital in nature on the ground that the assessee had derived an enduring advantage by incurring that expenditure as it was meant for the expansion of the business of the assessee. This action of the AO upheld by the DRP.
The AR stated that the foreign exchange gain or loss incurred on the acquisition of capital assets had to be adjusted with the cost of capital assets.
The Tribunal headed by Mahavir Singh ruled that Mahindra & Mahindra is entitled to depreciation on Capital Expenditure of exchange fluctuation loss.
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