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2020 (7) TMI 37 - AT - Income TaxRevision u/s 263 - disallowance u/s 14A read with Rule 8D - HELD THAT:- We modify the order passed by Ld Pr. CIT and direct the AO to examine the claim of the assessee and compute the addition to be made under clause (f) to Explanation 1 to sec.115JB of the Act independently without having regard to the provisions of sec.14A of the Act. Foreign exchange fluctuation loss arising on account of re-statement of outstanding foreign currency loan - AO did make enquiries on this issue and has accepted the explanations of the assessee - HELD THAT:- We notice from the above said letters furnished by the assessee before the AO that the assessee has explained as to how the loss has arisen, why the provisions of sec.43A are not applicable and why the claim is on account of revenue expenditure. We have noticed that the Ld Pr. CIT has correctly explained that the provisions of sec.43A shall apply only to those fluctuations in foreign currency which arises at the time of making repayment of loan, i.e.., it does not apply to marked to market loss arising on account of restatement of loan at the year end. We notice that the Ld Pr. CIT has brought out the fact that the notional foreign currency loan has been taken by the assessee for acquiring fixed assets and hence it has capitalized the foreign currency fluctuation loss arising on restatement of outstanding loan in its books of accounts. The Ld Pr. CIT has also placed reliance on the decision in the case of Sutlej Cotton Mills [1978 (9) TMI 1 - SUPREME COURT] wherein it has been held that the deduction of foreign currency fluctuation loss would depend upon the question as to whether the same is on capital account or revenue account. Admittedly, the AO did not examine this important aspect while completing the assessment proceedings. Hence, we are of the view that the assessment order is rendered erroneous, in view of the non examination of the issue in proper perspective. We have noticed earlier that the Ld Pr. CIT has also taken a view that the market to market loss is a notional loss. However, various case laws discussed above do not support the view taken by Ld Pr. CIT. Accordingly we set aside the said view of Ld Pr. CIT. We are of the view that the Ld Pr. CIT was justified in restoring this issue to the file of the AO.
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