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TMI Blog2007 (3) TMI 204X X X X Extracts X X X X X X X X Extracts X X X X ..... B. C. KANDPAL JJ. JUDGMENT 1. These are the appeals under section 260A of the Income-tax Act, 1961, arising out of the orders passed by the Income-tax Appellate Tribunal, New Delhi. 2. I. T. A. No. 91/2003 arises out of the order dated August 28, 2002, passed by the Income-tax Appellate Tribunal Bench "C", Delhi, in I. T. A. No. 2591/Del./97 relating to assessment year 1992-93; I. T. A. No. 89/2003 arises out of the order dated August 28, 2002, passed by the Income-tax Appellate Tribunal Bench "C", Delhi, in I. T. A. No. 2592/Del./97 relating to the assessment year 1993-94; I. T. A. No. 92/2003 arises out of the order dated October 31, 2002, passed by the Income-tax Appellate Tribunal Bench "E" Delhi in I. T. A. No. 355/Del./9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exchange on account of fluctuation in foreign exchange on the last date of the accounting year ending March 31, 1992 (i.e. the assessment year in question) being a contingent notional liability was allowable, as deduction under the Income-tax Act? 2. Whether the foreign exchange losses arisen on account of revaluation of the foreign exchange borrowings utilized on revenue account was not allowable as deduction under the Income-tax Act as repayments of these borrowings fell after the accounting year under consideration and, therefore, liability for such losses did not arise in the accounting year under consideration 3. Whether in view of section 43A of the Income-tax Act, the Tribunal was right in taking into consideration foreign exchan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reads as follows "37. (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee, laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head 'Profits and gains of business or profession'. Explanation.— For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of foreign exchange fluctuation on the last date of the accounting year under consideration is only a contingent and notional liability, hence not allowable and the same did not get crystallized or accrued in the year under consideration. The Assessing Officer was justified to disallow the same in the impugned assessment order. 10. The first substantial question of law is answered in the negative. 11. So far as the substantial questions of law formulated at serial Nos. 2, 3 and 4 are concerned, we hold that the foreign exchange borrowings made for general purposes which were partly used in the revenue account and partly in the capital account and repayment of which fell beyond the accounting year under consideration, the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny assets payable in foreign exchange or to repay loan, if any, in foreign currency borrowed specifically for the purposes of acquiring the assets. Accordingly, the foreign exchange fluctuation losses, if any, duly quantified and actually repaid on the capital component is allowable per the provisions of section 43A of the Act. It is very clear that Parliament in its wisdom, while enacting section 43A in the Act, took care of the foreign exchange variations rate with respect to capital assets. There is no such provision with respect to revenue component on account of these foreign exchange variations, if any at all. 14. Further, it is clear from the material on record, that all the carry forward foreign exchange losses, subject to suffi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich legally could not be allowed nor was there any material on record to justify such deductions. The impugned orders of the Tribunal are perverse, without any material on record and against the statutory provisions of the Act. The assessee did not actually pay any amount to any of the creditors nor it became due nor was there any devaluation of exchange rate but on mere presumption ii the Tribunal had allowed. 17. The substantial questions of law formulated at serial Nos. 2, 3 and 4 are also answered in the negative. 18. Learned counsel for the respondent has submitted that the COD vide its minutes of meeting dated March 2, 2007, refused to grant permission to the Revenue Department to pursue the appellants in this court on the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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