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2016 (12) TMI 939 - ITAT KOLKATAAddition on foreign exchange gain - restatement of liability - contingent gain - Held that:- As has been pointed out by ld DR that once the utilization of borrowings are held to be on revenue account and mercantile system followed, then the resultant exchange gain or loss at the end of the year due to restatement of foreign currency loan would automatically take the revenue receipt/expenditure as the case may be. Accordingly, we allow the appeal filed by the Revenue on this issue. However, we find in the order of the ld CIT (A) that the assessee had incurred exchange loss for the assessment year 2005-06 but not claimed as deduction treating it notional in nature in line with the consistent stand taken by the assessee. In this regard, we deem it fit and appropriate in the interest of justice, to give direction to the Learned AO to grant deduction of exchange loss in the subsequent assessment years to be in consonance with our findings hereinabove. Otherwise, it would only result in Revenue trying to blow hot and cold simultaneously. Accordingly, the ground raised by the Revenue is allowed subject to the direction given above. Disallowance of interest on borrowings - Held that:- As the assessee company is engaged in the business of investment and finance, therefore the interest paid by the company on the amount borrowed for the purpose of business should be allowed as revenue expenditure under section 36(1) (iii)/ 37(1) of the Act. Thus it would be fair and proper to allow the interest expenses on loan as revenue expenditure. Accordingly, we allow the appeal filed by the assessee. Non-taxability of income from service fees - Held that:- CIT(A) pointed out that in case of put option it is contingent and based of future uncertain events, there is no transfer and there is no capital asset accruing to the assessee, therefore the consideration of put option is not a capital asset. Besides, we have already allowed in this appeal the interest on borrowed capital,( to acquire the fixed investments), as revenue in nature. Considering the above cited factual position, we dismiss the said ground of the assessee.
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