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| The Tax Publishers2020 TaxPub(DT) 5344 (Pune-Trib) INCOME TAX ACT, 1961
Section 37(1)
Loss on account of fluctuation in foreign exchange currency rate on the reinstatement of ECB loan could not be disallowed on account of notional loss as the term 'expenditure' covers even a case of loss, even though the said amount has not gone out from the pocket of the assessee.
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Business expenditure - Allowability - Loss on account of fluctuation in foreign exchange currency rate on reinstatement of ECB loan -
Assessee availed ECB loan acquisition of assets in India. It incurred a loss on account of fluctuation in foreign exchange currency rate on the reinstatement of ECB loan and claimed the same as revenue expenditure. AO rejected contention of assessee holding that loss so claimed was notional. Held: The principal objection for allowance of claim being notional loss was no longer tenable in law in the light of the case of Woodward Governor India Pvt. Ltd. [(2009) 312 ITR 254 (SC) : 2009 TaxPub(DT) 1628 (SC)] wherein Apex Court had quoted with approval the decision of M.P. Financial Corporation [(1987) 165 ITR 765 (MP) : 1987 TaxPub(DT) 425 (MP-HC)] as approved by Madras Industrial Investment Corporation Ltd. [(1997) 225 ITR 802 (SC) : 1997 TaxPub(DT) 1209 (SC)] wherein it was held that the term 'expenditure' covers even a case of loss even though the said amount has not gone out from the pocket of the assessee. Following the same, loss on account of fluctuation in foreign exchange currency rate on the reinstatement of ECB loan was allowed as revenue expenditure.
Followed:CIT v. Woodward Governor India Pvt. Ltd. (2009) 312 ITR 254 (SC) : 2009 TaxPub(DT) 1628 (SC), M.P. Financial Corporation [(1987) 165 ITR 765 (MP) : 1987 TaxPub(DT) 425 (MP-HC)] and Madras Industrial Investment Corporation Ltd. [(1997) 225 ITR 802 (SC) : 1997 TaxPub(DT) 1209 (SC)].
REFERRED :
FAVOUR : In favour of assessee.
A.Y. : 2012-13 & 2014-15
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