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2014 (10) TMI 846 - ITAT CHENNAILoss on account of exchange fluctuation - Allowable deduction while computing income under the head "Profits and gains of business" - Held that:- On a reading of the assessment order and the letter issued by the Corporation Bank, Credit Division (Sanctions), it is clear that the assessee did not utilise foreign currency term loan for acquiring capital asset in India. The assessee has obtained term loans in Indian currency from the Corporation Bank acquired the assets and later on the outstanding liability of three term loans was converted into foreign currency term loan. The assessee has not acquired assets from outside India, therefore the provisions of section 43A which provides for adjustment of rate of exchange in currency to the actual cost has no application in the assessee's case as the provisions of section 43A applies to an assessee who has acquired any asset in any previous year from the country outside India and increase in liability in consequence of any change in the rate of exchange during that previous year after acquisition of such asset. Even the definition of actual cost in section 43A does not provide for any increase or reduction due to exchange rate fluctuation on account of the assessee converting its Indian term loans into foreign currency term loan. The assessee is consistently following the method of showing gain/loss on account of exchange fluctuation as revenue loss following the Accounting Standard 11. As submitted by the counsel, the assessee had in fact shown gain in exchange fluctuation during the assessment year 2008-09 and also in the assessment year 2010-11. In such circumstances, the loss on account of exchange fluctuation cannot be treated as capital loss - Decided in favour of assessee.
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