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| The Tax Publishers2020 TaxPub(DT) 4154 (Mad-HC) : (2020) 428 ITR 0559 INCOME TAX ACT, 1961
Section 43A, 37(1)
Premium for hedging foreign exchange fluctuations as regards loan availed of for purchase of fixed asset was to be treated as capital expenditure under section 43A.
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Capital on revenue expenditure - Premium for hedging foreign exchange fluctuations as regards loan availed of for purchase of fixed asset - -
Assessee availed of loan for purchase of capital assets in India. The loan was availed of in Indian currency and pursuant to request made by assessee, by entering into a contract dt. 4-8-2011 with State Bank of India, the loan was converted into foreign currency loan with a view to save interest. This resulted in premium payable by assessee on forward contract. Revenue treated premium for hedging foreign exchange fluctuations as capital expenditure under section 43A.Held: It was the purpose for which loan was raised that was of prime significance. As purpose of the loan was to finance fixed asset, Exchange difference was required to be capitalized, as rightly done by AO.
REFERRED :
FAVOUR : Against the assessee.
A.Y. : 2013-14
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