TMI Blog2015 (5) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... - PUNJAB AND HARYANA High Court ) to decide its applicability to the present facts after letting the parties before it an opportunity to produce evidence in support of their respective cases - Decided in favour of assessee for statistical purposes. Actual loss incurred due to fluctuation in currency rates disallowed - advance received from a foreign buyer and demurrage payable to a foreign buyer - Held that:- Claiming of revenue loss on account of foreign exchange rate fluctuation, is an allowable expenditure on the date of making its balance sheet. This revenue loss is not to be postponed to a future date when the transaction gets crystalised either by performance and/or cancellation of the contract. This is so agreed, as the issue now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn ? (B) Whether on the facts and in the circumstances of the case, the appellate Tribunal is right in confirming the order of the Commissioner (Appeals) disallowing the actual loss incurred due to fluctuation in currency rates in respect of advance received from a foreign buyer and demurrage payable to a foreign buyer ? Facts:- 3. For the assessment year 2001-02 the appellant-Assessee filed its return of income declaring a total income of ₹ 28.61 lakhs. In its return of income the appellant had : (a) claimed an expenditure on account of interest aggregating to ₹ 27.03 lakhs being the interest paid on pre shipment packing credit facility obtained by it. The Assessing Officer disallowed the entire expenditure on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r adjusting an enhanced deduction on account of 80HHC of the Act.4. Being aggrieved by the order dated 26.3.2004 of the Assessing Officer, the appellant preferred an appeal to the Commissioner of Income of Income Tax (Appeals) [CIT(A)]. By an order dated 26/12/2005, the CIT(A) concluded as under: (a) On principle upheld the disallowance of interest on pre shipment packing credit in respect of funds diverted to its sister concern M/s. BBPL. This by following the decision of the Punjab and Haryana High Court in S.A. Builders Ltd. V/s. CIT reported in (2004) 269 ITR 535 and a decision of this Court in Phaltan Sugar Works Ltd. V/s. CIT reported in (1994) 208 ITR 989 wherein it was held that interest on borrowed capital which is being advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the extent the funds were diverted by the appellant to its sister concern BBPL; and (b) disallowance of the entire loss claimed on foreign exchange fluctuation while making of its account as on 31/03/2001 i.e. previous year ending relevant to Assessment Year 2001-02. 6. Being aggrieved by the impugned order dated 8.8.2007 of the Tribunal, this appeal has been filed by the appellant - assessee on the above substantial questions of law. 7. Re: Question (A): (i) It is the appellant's case that it had funds of its own available for the purposes of making advances to its sister concern M/s. BBPL. This is an admitted position as recorded in the order of the Assessing Officer. Notwithstanding the above, the presumption in the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant had advanced money to M/s BBPL out of the interest bearing borrowed funds. Thus no occasion to apply any presumption to the present facts can arise and therefore, the decision of this Court in Reliance Utilities Power Ltd.(supra) proceeding on the basis that when both interest free funds and interest bearing funds are available then the presumption would be that investments etc are made would be out of interest free funds can have no application in the face of finding of fact in this case. Thus no interference with the impugned order on application of incorrect presumption, is called for. (iii) However, the Apex Court in S. A. Builders Ltd(supra) has held that even where the funds are advanced out of interest bearing funds to its si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led any evidence to show how the borrowed funds were utilized by BBPL or the appellant given an opportunity to establish the need of the funds by BBPL for the benefit of appellant-Assesses. In the above view, we set aside the order of the Tribunal disallowing payment of interest to the extent of ₹ 17.27 lakhs and restore the issue to the Tribunal for fresh consideration. It is made clear that the Tribunal would also consider the decision of the Apex Court in S.A. Builders Ltd. (supra) to decide its applicability to the present facts after letting the parties before it an opportunity to produce evidence in support of their respective cases. 8. Re: Question (B): It is agreed position between the parties that claiming of revenue l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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