Essel Mining & Industries Ltd. v. Addl. CIT

INCOME TAX ACT, 1961

--Capital or revenue receipt--Foreign exchange fluctuation gain on loan taken for purchases of capital assetAO claimed it taxable in return of income----First appellate authority should entertain claim of the assessee, that foreign exchange fluctuation gain on foreign currency loan taken for purchase of capital asset would be capital receipt not chargeable to tax, even where assessee had claimed it as taxable in its return of income and it had made such claim for the first time before first appellate authority and no revise return had been filed by the assessee.--Assessee was engaged in the business of raising, trading and manufacture of ore and ferro alloys. Assessment was completed with certain addition and assessee was in appeal before CIT(A). Assessee noted that out of foreign exchange fluctuation gain declared by it in its return of income, there was certain foreign exchange fluctuation gain pertaining to foreign currency loan availed for purchase of indigenous machinery. Assessee contended before CIT(A) that since the foreign currency loan had been availed of for purchase of indigenous fixed assets, the gain therefrom should be considered as being on capital account and consequently, the said sum was required to be reduced from the assessee's total income. CIT(A) rejected the contention stating that assessee had not make any claim for exclusion of the aforesaid gain by filing a revised return. Held: Stand taken by the assessee deserves to be accepted. Facts with regard to the foreign exchange fluctuation gain and the purpose for which the foreign currency loan had been availed of viz., to purchase indigenous machineries were not in dispute. The first appellate authority ought to have entertained the claim of the assessee and examined the same on merits rather than refusing to entertain the claim by relying on the decision in the case of Goetze India Ltd. Therefore, the case was remanded to the file of CIT(A).