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| The Tax Publishers2020 TaxPub(DT) 0947 (Pune-Trib) INCOME TAX ACT, 1961
Section 37(1)
Foreign exchange loss arising out of foreign exchange fluctuation in respect of loan in foreign currency used for acquiring fixed assets should be allowed as revenue expenditure by charging the same into Profit and Loss Account and not as capital expenditure by deducting the same from cost of respective fixed assets.
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Business expenditure - Allowability - Foreign exchange fluctuation (loss) arising on repayment of ECB loan -
During the course of assessment proceedings, AO noticed that assessee had claimed foreign exchange loss. On enquiries it was noticed that it was on account of loss towards repayment of ECB Loan which was utilized by assessee for purchase of fixed assets. Assessee was show caused as to why loss should not be capitalized instead of its claim of revenue expenditure, to which assessee made the submissions which were not found acceptable to AO. AO thereafter held the expenditure to be capital expenditure, but eligible for depreciation. He thereafter, granted the benefit of depreciation and disallowed the balance expenditure.Held: Foreign exchange loss arising out of foreign exchange fluctuation in respect of loan in foreign currency used for acquiring fixed assets should be allowed as revenue expenditure by charging the same into Profit and Loss Account and not as capital expenditure by deducting the same from cost of respective fixed assets. AO was not justified in denying the claim of revenue expenditure.
Followed:CIT v. Woodward Governor India P. Ltd. (2009) 312 ITR 254 (SC) : 2009 TaxPub(DT) 1628 (SC), CIT v. Tata Iron And Steel Co. Ltd. (1998) 231 ITR 285 (SC) : 1998 TaxPub(DT) 1068 (SC), Sutlej Cotton Mills Limited v. CIT (1979) 116 ITR 1 (SC) : 1979 TaxPub(DT) 782 (SC), CIT v. Tata Locomotive And Engineering Company Limited -(1996) 60 ITR 405 (SC) : 1966 TaxPub(DT) 318 (SC), CIT v. Sandoz (India) Limited (1994) 206 ITR 599 (Bom) : 1994 TaxPub(DT) 700 (Bom-HC), CIT v. V.S. Dempo And Co. Pvt. Ltd. (1994) 206 ITR 291 (Bom) : 1994 TaxPub(DT) 442 (Bom-HC), Electric Lamp Manufacturers (India) Limited v. CIT (1992) 198 ITR 0760 (Cal) : 1992 TaxPub(DT) 85 (Cal-HC), CIT v. Bharat General And Textile Industries Limited (1986) 157 ITR 158 (Cal) : 1986 TaxPub(DT) 552 (Cal-HC) and Baby Memorial Hospital Ltd. v. Asstt. CIT (2019) 111 Taxman.com 189 (Coch-Trib.) : 2019 TaxPub(DT) 7471 (Coch-Trib)Relied:Cooper Corporation (P.) Ltd. v. DCIT (2006) 69 taxmann.com 244 (Pune) : 2016 TaxPub(DT) 2460 (Pune-Trib)
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2012-13
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