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2022 (4) TMI 856 - ITAT CHENNAIDisallowance of loss on claim of Foreign Exchange loss - whether notional loss in Foreign Exchange rate claimed by the assessee in the instant case was not incurred in connection with loan for revenue purposes so as to allow the deduction as revenue expenditure - whether investment made in a foreign subsidiary company as advance is only capital in nature and hence loss due to fluctuation in Foreign Exchange rate is only a capital loss on investment? - CIT-A deleted the addition - HELD THAT:- High Court of Madras in the case of CIT Vs. Celebrity Fashion Ltd. [2020 (9) TMI 1022 - MADRAS HIGH COURT] had considered an identical issue and held that in case of the assessee, not being dealer in foreign exchange, but exporter of cotton, loss incurred on account of cancellation of forward contract would not be speculative losses falling within the provisions of section 43(5) of the Act and the assessee would be entitled to claim deduction in respect of loss suffered by it as business loss. The sum and substance of ratio laid down by various courts, including the Hon'ble Supreme Court is that if loss incurred on account of fluctuation of foreign currency, whether it is on account of revenue account or capital account, same needs to be allowed as deduction, unless loss comes under provisions of section 43(5) of the Act. In this case, the revenue fails to bring on record any evidence to prove that loss incurred by the assessee on account of restatement of loan liability is capital in nature and further, it comes under the provisions of section 43A - Therefore, we are of the considered view that there is no reason to interfere with the findings of the learned CIT(A) to delete additions made by the Assessing Officer towards disallowance of forex loss. Hence, we are inclined to uphold findings of the learned CIT(A) and reject grounds taken by the revenue.
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