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TMI Blog2020 (2) TMI 419X X X X Extracts X X X X X X X X Extracts X X X X ..... venue expenditure by charging the same into Profit and Loss Account and not as capital expenditure by deducting the same from cost of respective fixed assets. Revenue has not placed any contrary binding decision in its support nor has demonstrated as to how the decision of Cochin Tribunal in the case of Baby Memorial Hospital Ltd. Vs. ACIT (supra) would not be applicable to the present facts. In such situation, we are of the view that the Assessing Officer was not justified in denying the claim of revenue expenditure. Assessing Officer has allowed depreciation on the amounts capitalized. Since we are holding the amount of expenditure claimed by assessee to be revenue expenditure, we direct the Assessing Officer to withdraw the benefit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The learned CIT(A)-1, Pune erred in law and on facts in upholding the addition made by the learned DICT, Circle 11, Pune amounting to ₹ 4,57,841/- regarding foreign exchange fluctuation (loss) arising on repayment of ECB Loan. The learned IT-Authorities ought to have appreciated that foreign exchange loss had arisen due to obligation as to repayment of ECB Loan availed for business purpose and therefore is an allowable deduction u/s 37(1) of the ITA, 1961. 2. The learned CIT(A)-1 and the learned AO erred in law and on facts in not appreciating that foreign exchange loss on repayment of ECB loan is revenue in nature as per Accounting Standard 16 r.w. Accounting Standard Interpretation 10. 3. During the course of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1998) 231 ITR 285 (SC). In that case the Hon. Apex Court had an occasion to deal with this issue for period prior to introduction of section 43A of the I.T. Act, 1961 which was introduced by Finance Act 1967 w.e.f. 1/4/1967. In that case the assessee had acquired certain depreciable assets using foreign currency loans and adjusted the foreign exchange fluctuation with cost of asset. The Hon. Apex Court on these set of facts held that section 43A is inapplicable as the same was introduced later and also held that the manner of repayment of loan cannot affect the cost of asset so acquired. The above observation was given in the context of applicability of section 43A of the I.T. Act, 1961 and therefore, the same cannot be applied in the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ric Lamb Mfg. (India) Ltd. (1992) 198 ITR 760 (Cal) (viii) V S Dempo Co. Ltd. 206 ITR 291 (Bom) The appellant has relied upon decision of Hon. Pune Tribunal in the case of Cooper Corporation (P) Ltd. (2006) 69 taxmann.com 244. In that case facts were slightly on different footing as initially loans were taken in Indian Rupees from Banks for acquisition of assets and expansion of Project. Subsequently, the loans were converted into Foreign Currency Loans in order to avail benefit of lower rates of interest. The assessee saved interest cost but suffered losses due to exchange fluctuation. The loss was incurred on account of effect to save interest cost due to low interest rate of Foreign Currency loan by switching over. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Application Centre Pvt. Ltd. Vs. DCIT (supra). He further submitted that Accountant Standard 11 issued by the Institute of Chartered Accountants of India (ICAI) mandates that all foreign currency loss / gains relating to reinstatement of foreign currency loans which includes the capital items are to be taken to Profit and Loss Account compulsorily and the Hon ble Apex Court in the case of CIT Vs. Woodward Governor India (P.) Ltd. 312 ITR 254 (SC) has held that Accounting Standards of ICAI are binding for issues on foreign exchange treatment. He thereafter submitted that Cochin Tribunal in the case of Baby Memorial Hospital Ltd. Vs. ACIT (2019) 111 taxman.com 189 (Cochin-Trib.) after considering various decisions cited therein has held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. Vs. ACIT (supra) after considering various case laws including the decision of Hon ble Apex Court in the case of Sutlej Cotton Mills Ltd. Vs. CIT 116 ITR 1 (SC) and other decisions has held that foreign exchange loss arising out of foreign exchange fluctuation in respect of loan in foreign currency used for acquiring fixed assets should be allowed as revenue expenditure by charging the same into Profit and Loss Account and not as capital expenditure by deducting the same from cost of respective fixed assets. Before us Revenue has not placed any contrary binding decision in its support nor has demonstrated as to how the decision of Cochin Tribunal in the case of Baby Memorial Hospital Ltd. Vs. ACIT (supra) would not be applicable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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