9911796707
TMI Blog2018 (12) TMI 515X X X X Extracts X X X X X X X X Extracts X X X X ..... if the borrowed funds were not repaid, it will not alter the cost of the asset. The Apex Court further found that the cost of raising money for purchase of the asset and the cost of the asset are two different and independent transactions. Therefore, for the purpose of depreciation, the cost of asset cannot be reduced or increased due to exchange rate fluctuation. As referring to Section 43A of the Act which provides for capitalization of such losses arising out of fluctuation in foreign currency on acquisition of capital asset outside India COOPER CORPORATION (P.) LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX [2016 (5) TMI 809 - ITAT PUNE] found that it may not be applicable for acquisition of asset in India. Referring to Accounting Standa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... According to the Ld. representative, the interest on the said loan was fully allowed by the Assessing Officer as revenue expenditure. However, the loss claimed by the assessee due to fluctuation in foreign currency was disallowed by the Assessing Officer on the ground that there was no underlying asset or underlying liability. Placing reliance on the decision of Pune Bench of this Tribunal in Cooper Corporation Pvt. Ltd. v. DCIT in I.T.A. No.866/PN/2014 dated 29.04.2016, the Ld. representative submitted that on identical circumstances, the Pune Bench of this Tribunal found that the loss claimed by the assessee on account of foreign exchange fluctuation is allowable under Section 37(1) of the Income-tax Act, 1961 (in short 'the Act') ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose and not for revenue purpose. Hence, the judgment of Apex Court in Woodward Governor of India (P.) Ltd. (supra) may not be applicable to the facts of this case. Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly found that the loss due to exchange rate fluctuation to the extent of ₹ 98,98,784/- is not allowable expenditure. 4. We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the assessee borrowed loan in Indian rupee from City Union Bank Ltd. for acquiring the business of M/s Singaravelar Spinning Mills Private Limited, Sathyamangalam. Subsequently, the loan was converted into foreign currency loan on 11.09.2007. The assessee claims the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital asset outside India, the Pune Bench found that it may not be applicable for acquisition of asset in India. Referring to Accounting Standard - 11, the Pune Bench found that the loss or gain arising from conversion of liability at the closing rate should be recognized in the Profit & Loss account for the reporting period. The Pune Bench has placed its reliance on the CBDT notification S.O.892(E) dated 31.03.2015. Ultimately, the Pune Bench recorded its finding at paragraphs 10.9 and 11 as follows:- "10.9 We find that the decision in the case of Sutlej Cotton Mills Ltd. (supra) relied upon by the Ld. Departmental Representative is of no assistance to the Revenue. The Hon'ble Supreme Court therein stated the principle of law that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her provision of the Income Tax Act dealing with the issue, claim of exchange fluctuation loss in revenue account by the Assessee in accordance with generally accepted accounting practices and mandatory accounting standards notified by the ICAI and also in conformity with CBDT notification cannot be faulted. No inconsistency with any provision of Act or with any accounting practices has been brought to our notice. Otherwise also, in the light of fact that the conversion in foreign currency loans which led to impugned loss, were dictated by revenue considerations towards saving interest costs etc. we have no hesitation in coming to the conclusion that loss being on revenue account is an allowable expenditure under S. 37(1) of the Act. The o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
