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2014 (8) TMI 901 - HC - Income TaxAllowability of amount u/s 43A - foreign exchange fluctuation - Whether ₹ 49,98,072/- debited in the Profit and Loss Account were covered by Section 43A of Income Tax Act, 1961 and/or was otherwise expenditure of capital nature – Held that:- Reference to Section 43A would be redundant and not necessary as the revenue has not been able to state and point out that the loan taken under the heading FCNR(B) loan was for purpose of acquisition of any capital asset - AO has accepted that the loan was not for acquisition of an asset but he observed that assets had been acquired in the earlier period - He did not specify or hold that an asset was acquired - Finding of the CIT(A) is clear and categorical that the loan was not for acquisition of an asset, payment for which was to be made in foreign currency - ₹ 49,98,072/- was the actual expenditure incurred by the assessee as per the terms negotiated - The payment was to save and protect the assessee from foreign exchange fluctuation loss – thus, the payment of ₹ 49,98,072/- would be of revenue nature i.e. virtually in nature of payment of interest for the loan taken having regard to the nature and type of loan which was taken i.e. FCNR(B) Loan Account. Allowability of foreign exchange loss – Held that:- Following the decision in CIT vs Woodward Governor India (P) Ltd. [2009 (4) TMI 4 - SUPREME COURT] - exchange fluctuation arising on revenue account transaction should be allowed as deductible, expenditure - the expenditure is an allowable expenditure - the expression “expenditure” in Section 37(1) of the Act connotes “what is paid out” and what has gone irretrievably - But the word “expenditure” used in context of Section 37(1) would also cover loss even though the said amount had not gone out from the pocket of the assessee - Decided against revenue.
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