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TMI Blog2022 (4) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on ble Supreme Court in M/s. Woodward Governor Pvt. Ltd. 3. The Id. CIT(A) erred in not appreciating the fact that 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. 3. Brief facts of the case are that the assesse company is engaged in the business of manufacturing of carburetors, fuel pumps for two wheelers and four wheelers filed its return of income for the assessment year 2011-12 on 30.11.2012 declaring total income of ₹ 22,27,62,820/-. The assessment has been completed u/s.143(3) of the I.T. Act, 1961, on 29.01.2016 by making various additions. The case has been subsequently revised u/s.26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submissions of the assessee are examined, As per the submissions, it is seen that the assessee company had claimed a net exchange loss of ₹ 177.48 lakhs during the year on account of foreign exchange fluctuation loss. The external commercial bank loans which had been taken for the purpose of fulfilling the working capital loans of the assessee had been restated by taking the prevailing exchange rate as on 31,3.2011. The resultant loss has been claimed by the assessee as revenue expenditure for the year. The forex loss claimed by the assessee is entirely on revenue account. It is further submitted that no part of the ECB has been utilised for the purchase of any capital goods, irnported or domestic. The exchange fluctuation loss is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. and Chennai Tribunal in M/s. Hyundai Motor India Ltd. are examined. The assessee company has consistently followed the practice of restating its gain and liability by restating the present value of the ECB loan. This regular accounting practice of the assessee needs to be accepted. The decision of Hon ble Supreme Court in M/s. Woodward Governor Pvt. Ltd. is conclusive on this issue. Considering the same, the Assessing Officer is directed to allow this expenditure claimed of ₹ 1,78,19,870/-. Grounds of appeal on this issue are allowed. 5. The learned DR submitted that the learned CIT(A) has erred in deleting additions made by the Assessing Officer towards disallowance of forex loss on restatement of loan liability as o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed by the assessee is in the nature of revenue account, because no part of external commercial borrowings has been utilized for the purpose of purchase of any capital goods, imported or domestic. Therefore, the learned CIT(A) opined that loss claimed by the assessee on account of restatement of loan and resultant loss is revenue in nature, which cannot be disallowed as capital in nature or comes under provisions of section 43A of the I.T Act, 1961. The learned CIT(A), while allowing relief to the assessee, has followed decision of the Hon'ble Supreme Court in the case of M/s. Woodward Governor India Pvt.Ltd. (supra) and also decision of the ITAT., Pune Bench in the case of Cooper Corporate Pvt.Ltd. vs. DCIT in ITA No.866/Pn/2014. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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