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2018 (2) TMI 2027 - AT - Income TaxDisallowance of loss on account of foreign exchange fluctuation - addition stating that these expenditure have not been incurred by the assessee for the purposes of the business - CIT(A) allowed the claim of the assessee @50% of such claim holding that assessee has incurred such foreign exchange loss on account of loan for the purposes of the business - HELD THAT - Revaluation of the foreign exchange liability is in accordance with accounting standard 11 issued by ICAI and the ld Assessing Officer has allowed 50% bank charges u/s 37(1). Hence following the decision of the Hon ble Supreme Court in CIT Vs. Woodward Governance India Pvt. Ltd 2009 (4) TMI 4 - SUPREME COURT the allowed the claim of the assessee to the extent of 50%. He further held that looking to the facts on record and the true nature of transactions it cannot be said that the entire sum expended by the assessee are wholly and exclusively for the purposes of business. AR also could not show that the whole funds have been used for the business purposes. No such details were mentioned before the ld AO or before the ld CIT(A). While disallowing the bank charges to the extent of 50% vide order he has also mentioned that the reasons for the confirmation of disallowance is absence of complete details provided before the ld AO. DR also could not show us any reason that why such fluctuation is capital in nature. In view of this we do not find any infirmity in the order of the ld CIT(A) in allowing 50% foreign exchange losses holding that they are incurred for the purposes of the business. In the result appeal of the revenue raising the solitary ground is dismissed.
Issues:
- Disallowance of foreign exchange fluctuation loss on loans - Disallowance on account of interest of working capital loss Analysis: 1. The appeals were filed against the order of the ld CIT(A)-VI for the Assessment Year 2009-10. The revenue challenged the deletion of partial disallowance of foreign exchange fluctuation loss on loans, while the assessee challenged the upholding of disallowance on interest of working capital loss and foreign exchange fluctuation loss. 2. The revenue contended that the disallowance on account of foreign exchange fluctuation loss on loans should not have been restricted to a certain amount as the loan and expenses were capital in nature. The appeal raised specific grounds regarding the disallowance amount and its capital nature. 3. The assessee challenged the disallowance made by the Assessing Officer towards interest on working capital loan and foreign exchange fluctuation loss. The grounds of appeal included arguments against the upholding of the disallowance and the application of the 50% disallowance without proper consideration of the case's merits. 4. The ITAT dismissed the appeal of the assessee due to a defective filing that was not properly signed by the authorized person. Despite the filing in 2013, the appeal remained unsigned, leading to its dismissal without adjudication on the merits. 5. The appeal of the assessee was ultimately dismissed, highlighting the importance of proper filing procedures and authorization. 6. Regarding the revenue's appeal, the disallowance of foreign exchange loss was contested, arguing that the expenses were capital in nature and should have been fully disallowed. 7. The ld DR and ld AR presented their arguments based on the orders of the ld AO and ld CIT(A) respectively. 8. The tribunal carefully considered the contentions and found that the foreign exchange loss was incurred for business purposes. The ld CIT(A) allowed 50% of the claim, citing accounting standards and previous court decisions. It was noted that complete details were not provided before the ld AO, leading to the partial disallowance. 9. The tribunal found no infirmity in the ld CIT(A)'s order, upholding the 50% foreign exchange losses as being incurred for business purposes. The appeal of the revenue on this ground was dismissed. 10. In conclusion, both the appeals of the assessee and revenue were dismissed, with the tribunal pronouncing the order in open court on 15/02/2018.
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