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2019 (9) TMI 1116 - AT - Income TaxDisallowance of foreign exchange fluctuation loss arising out of re-statement of External Commercial Borrowings (ECB) at the year end rates in accordance with Accounting Standard – 11 (AS-11) prescribed by the Institute of Chartered Accountants of India (ICAI) - disallowance of foreign exchange loss above by holding that it is capital expenditure and cannot be allowed as deduction u/s.37(1) - HELD THAT:- This issue is also squarely covered by the decision of Hon’ble Supreme Court in the case of Woodward Governor India Ltd.[2009 (4) TMI 4 - SUPREME COURT] wherein, among other aspects, it was also held that compliance to AS-11 of ICAI is mandatory for all companies registered in India. ECB has been utilized for purchase of capital assets in India by the assessee company. Thereafter, any change in the ECB value due to exchange fluctuation would not alter the cost of fixed assets. Reliance in this regard is placed on the decision in the case of Tata Iron and Steel Company Ltd.[1997 (12) TMI 5 - SUPREME COURT] Hence, it could be safely concluded that exchange loss has got absolutely no bearing / link with the cost of fixed asset. In that scenario, the only alternative is to treat the said loss as loss incurred on the revenue field and hence, to be allowed as revenue expenditure. In view of the aforesaid observations, we find that the decisions relied upon by the revenue are not at all applicable to the facts of the instant case and the decisions relied upon by us herein supra hereinabove would rule the field. Hence, we hold that the assessee deserves to be granted deduction towards foreign exchange fluctuation loss for more than one reason as detailed hereinabove. Accordingly, the grounds raised by the assessee are allowed.
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