TMI Blog2022 (2) TMI 695X X X X Extracts X X X X X X X X Extracts X X X X ..... Woodward Governor India Pvt. Ltd [ 2009 (4) TMI 4 - SUPREME COURT] In this case, the assessee has taken foreign currency working capital for the purpose of business of the assessee and thus, profit or loss arisen on account of restatement of such loan is in nature of revenue expenditure which can be allowed as deduction. The learned CIT(A), without appreciating those facts has simply confirmed additions made by AO. Hence, we set aside order of the learned CIT(A) and direct the Assessing Officer to allow deduction towards foreign exchange loss claimed by the assessee on account of restatement of foreign currency working capital loan and gold loan taken from Indian Overseas Bank. Disallowance of travelling expenses - Assessee failed to file necessary evidences before the AO to justify for travelling expenses claimed in books of account with reference to nexus between expenses and business activities of the assessee - HELD THAT:- It is well settled position of law that businessmen are required to incur travelling expenses. Therefore, it cannot be said that total expenditure incurred by the assessee is for personal purposes, but not for business purposes. At the same time, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax (Appeals) 2, Chennai, is erroneous, opposed to law and facts of the appellant s case. 2. The learned Commissioner of Income-tax (Appeals) erred in dismissing the appeal filed by the appellant. 3. The learned Commissioner of Income-tax (Appeals) erred in upholding the Assessing Officer s finding that the loss due to foreign exchange fluctuation in respect of the foreign currency loan availed by the appellant for working capital is not an allowable deduction. 4. The learned Commissioner of Income-tax (Appeals) similarly erred in upholding the Assessing Officer s finding that the loss due to foreign exchange fluctuation in respect of gold loans is not an allowable deduction. 5. The learned Commissioner of Income-tax (Appeals) erred in confirming the disallowance of entire travelling expenses incurred by the appellant for the purpose of business carried on by the appellant. 6. The learned Commissioner of Income-tax (Appeals) erred in confirming the estimated disallowance of ₹ 7,11,978/- out of general expenses incurred by the appellant for its business. 3. Brief facts of the case are that the assessee is a HUF, which is engaged in the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss arises on account of restatement of liability is a notional loss which cannot be allowed as deduction. 5. The learned A.R for the assessee submitted that the learned CIT(A) has erred in not appreciating fact that loss incurred by the assessee on account of fluctuation in foreign currency on account of working capital loan borrowed from banks is revenue expenditure which can be allowed as deduction. The learned A.R for the assessee referring to certificate issued by the Indian Overseas Bank submitted that as per certificate of banker, there is increase in rate of US $ which resulted in increase in value of loan borrowed by the assessee and hence, the assessee has provided difference between outstanding loan liability as per books of account and certificate issued by the bank. Therefore, same cannot be considered as notional loss. Similarly, the learned AR for the assessee referring to gold delivery challan and sale invoice issued by bank submitted that when the assessee has taken gold loans, value of gold has been fixed at ₹ 30 lakhs per kg., whereas when delivery has been taken, value has been increased which resulted in loss of ₹ 25 lakhs. Since the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court in the case of M/s. Sutlej Cotton Mills Ltd. (supra), where it was categorically held that profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency held by it, on conversion into another currency, such profit or loss would ordinarily be a trading profit or loss, if foreign currency is held by the assessee on revenue account or as a trading asset or as a part of capital embarked in the business. A similar issue has been considered by the Hon'ble Supreme Court in the case of CIT Vs. Woodward Governor India Pvt. Ltd (supra) . In this case, the assessee has taken foreign currency working capital for the purpose of business of the assessee and thus, profit or loss arisen on account of restatement of such loan is in nature of revenue expenditure which can be allowed as deduction. The learned CIT(A), without appreciating those facts has simply confirmed additions made by the Assessing Officer. Hence, we set aside order of the learned CIT(A) and direct the Assessing Officer to allow deduction towards foreign exchange loss claimed by the assessee on account of restatement of foreign currency working capital loan and gold lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. 11. The next issue that came up for our consideration from ground no.6 of the assessee appeal is 25% ad-hoc disallowance of general expenses. The Assessing Officer has disallowed 25% expenses like sale promotion expenses, incentives, vehicle expenses, business promotion expenses etc. on the ground that the assessee has failed to file necessary supporting bills and vouchers to prove expenses incurred for purpose of business of the assessee. It was explanation of the assessee before the Assessing Officer that various expenses debited into profit loss account are supported by self-made vouchers and which are genuine in nature and also incurred for the purpose of business of the assessee. 12. Having heard both the sides and considered material available on record, we find that both parties have failed to justify their cases with necessary evidences and reasons. Although, the assessee claims to have incurred those expenditure for purpose of business, but failed to justify those expenditure with necessary evidences. At the same time, the Assessing Officer has made 25% ad-hoc disallowance of expenses, but failed to give proper reasons for making such adhoc disallowances. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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