IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.VINOD CHANDRAN WEDNESDAY, THE 23RD NOVEMBER 2011 / 2ND AGRAHAYANA 1933 ITA.No. 6 of 2003() ------------------- AGAINST ORDER IN ITA.492/1998 DATED 29/04/2002 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT ---------------------------------------- THE COMMISSIONER OF INCOME TAX, KANNUR BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENT(S): APPELLANT ------------------------ THE KELTRON COMPONENT COMPLEX LTD., KALLIASSERI, KANNUR. ADV. SRI.A.K.JAYASANKAR NAMBIAR THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 23/11/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA NO.6/2003 APPENDIX APPELLANT'S EXHIBITS ANNEXURE-A : COPY OF ASSESSMENT ORDER DATED 26/03/98. ANNEXURE-B : COPY OF LETTER WHICH IS IN CONSONANCE WITH THE PROVISION NO.228/31-91-ITA-II DATED 05/05/93. ANNEXURE-C : COPY OF ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 11/08/98. ANNEXURE-D : COPY OF ORDER OF THE TRIBUNAL DATED 29/04/2002. //TRUE COPY// PA TO JUDGE. jg C.N.RAMACHANDRAN NAIR & K.VINOD CHANDRAN, JJ. .................................................................... I.T.A.No.6 of 2003 .................................................................... Dated this the 23rd day of November, 2011. J U D G M E N T Ramachandran Nair, J. Heard learned Standing Counsel for the Revenue and learned counsel for the respondent assessee. 2. The respondent assessee is a State Government Undertaking which incurred cost on import of spare parts and machinery. The assessee increased the cost in Indian Rupee with fluctuation in foreign exchange suffered by them. So far as the exchange rate fluctuation applicable to spare parts are concerned, the assessee's appeal was allowed by the Tribunal, against which no appeal is filed by the Revenue. However, in the Revenue's appeal, capitalisation and addition of exchange rate fluctuation attributable to cost of machinery is questioned. Since exchange rate fluctuation is directly attributable to the cost of the machinery, the same necessarily goes to increase the cost of machinery entitling the assessee ITA No.6/2003 2 for depreciation and other benefits. This is exactly what the Tribunal has held. This Court has also held in several cases that exchange rate fluctuation is to be added to cost of machinery for the purpose of granting depreciation. Consequently, we see no merit in the appeal filed by the Revenue and the same is accordingly dismissed. Sd/- (C.N.RAMACHANDRAN NAIR, JUDGE) Sd/- (K.VINOD CHANDRAN, JUDGE) jg