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2016 (12) TMI 1815 - AT - Income TaxNature of loss - Loss arising swap currency forex derivative - swap currency forex derivative entered into with Axis Bank Ltd. relating to principal amount of loan of ₹.10 crores - speculative loss or business loss - HELD THAT:- In this case, the value of loan was taken into consideration at exchange rate of ₹.43.1200 for US Dollar, US Dollar to Swiss Franc 1.2206 and from Swiss Franc to Indian rupees at 35.3269. The term loan was converted as a forex derivative for operation of the forex derivatives and while converting for operation of currency swap, the assessee has claimed loss of ₹.1,95,56,190/-. The assessee has also earned interest of ₹.10,39,561/- and had to pay as a settlement for currency swap amount of ₹.1,32,90,556/- and on account of currency option i.e., against US Dollar ₹.73,05,194/- to Axis Bank. Being so, the expenditure incurred on issue of debentures/equity shares, whether convertible or non-convertible is an allowable deduction as revenue expenditure in view of the decision of the Hon’ble Jurisdictional High Court in the case of CIT v. First Leasing Co. of India Ltd. [2007 (7) TMI 222 - MADRAS HIGH COURT] . Further, in the case of CIT v. Secure Meters Ltd. [2008 (11) TMI 66 - HIGH COURT RAJASTHAN] has also held that the debentures when issued were a loan and, therefore, whether they were convertible or non-convertible did not militate against the nature of the debenture, being loan and, therefore, the expenditure incurred would be admissible as revenue expenditure. In this case, it is not clear from the orders of authorities below for which purpose; the assessee has entered into currency swap forex derivatives. If the assessee has entered into forex derivatives contract for the purpose of issue of debentures/equity shares, then the loss claimed by it would be admissible as revenue expenditure and otherwise not. The Assessing Officer is directed to verify the same and decide in accordance with law. Thus, the ground raised by the assessee is allowed for statistical purposes. Interest receipts as income of the assessee - assessee credited the interest receipts to Capital Work in Progress - HELD THAT:- Under the terms of loan, the funds availed/drawn and brought into India had to be utilized immediately for the units and were not available for other purposes. Accordingly, the loan funds were withdrawn in tranches. The unutilized amounts were held by the lending bankers as short term deposits on which interest has been received by the assessee company for the period it was so held. On the other hand for the loan amounts so involved, the assessee was charged interest by the lending Banks. Interest on ECB loan paid during the year was ₹.10,01,57,046/- which has been capitalized and included in the capital work in progress as required under Accounting Standard 16. The interest received on the unutilized funds parked outside has also been taken to the same account. The gross interest of ₹.1,95,02,045/- so received from short term deposits were credited to capital work in progress. However, the Assessing Officer treated the same as income of the assessee and brought to tax. The ld. CIT(A) confirmed the order of the Assessing Officer. As relying on ARASAN ALUMINIUM INDUSTRIES PRIVATE LIMITED [1995 (9) TMI 25 - MADRAS HIGH COURT] we confirm the order of the ld. CIT(A) on this issue and dismiss the ground raised by the assessee. Admission of additional ground of appeal raised for the first time before the Tribunal - amount realized by transferring Carbon Credits – Certified Emission Reductions [CER], which is not liable to be included in the total income of the assessee was inadvertently credited in the profit and loss account as income in Co-Generation Division and added to the total income of the assessee - HELD THAT:-The additional ground raised by the assessee for the first time before the Tribunal is entertained. However, the matter is remitted back to the file of the Assessing Officer to examine and decide the issue in accordance with law after allowing opportunity of hearing to the assessee.
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