Depreciation on assets acquired out of foreign currency loans

DECIDED BY: ITAT, MUMBAI BENCH `L’, MUMBAI, IN THE CASE OF: DDIT (Int’l Taxation) Vs. Staubil A. G. India Branch Office, APPEAL NO: ITA No. 3703 /Mum/2005, DECIDED ON April 5, 2010

ORDER

Per D.K. AGARWAL (JM).

These two appeals preferred by the revenue are directed against the separate orders dated 31.1.2005 and 11.7.2006 passed by ld. CIT(A) for the Assessment Years 2001-02 and 2003-04 respectively. Since facts are identical and issues involved are common, both these appeals are disposed of by this common order for the sake of convenience.

2. Briefly stated the facts extracted from ITA No. 3703/M/2005 for Assessment Year 2001-02 are that the assessee is a Branch Office in India of Staubli A.G., Switzerland. It acts as a commission and meketing agent in respect of textile machineries manufactured by the Staubli Group entities, to customers in India. The Staubli Group entities directly sell/invoice and ship the machineries to the Indian customers. The assessee does not enter into a sales contract with the customers. The assessee also assists the customers in installation of the machineries at the client’s site. The machineries supplied by the Staubli Group entities are sold by them under a warranty –twelve months from the date of manufacture. The assessee renders after sales and maintenance services under the warranty period to the customers in India for which it receives service fees at agreed rates over and above its commission on sales of machineries. Besides this, the assessee also renders services to local customers after the warranty period and bills them locally for the services rendered. For the Assessment Year in question the assessee filed its return of income declaring total income at Rs.17,32,730/-. However, after making certain additions/ dis allowances the A.O. passed the assessment order u/s.143(3) of the I.T. Act, 1961(the Act) dated 19th March, 2004, determining the taxable income at Rs.42,78,830/-. On appeal, the ld. CIT(A) deleted the addition and dis allowance of depreciation made by the AO in toto and accordingly allowed the appeal.

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