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TMI Blog2017 (1) TMI 947X X X X Extracts X X X X X X X X Extracts X X X X ..... f the decision of the Hon'ble Supreme Court in the case of CIT Vs. M/s. Woodward Governor India Ltd. 294 ITR 451 (SC) since the ECB loan had been taken for capital expenditure and not for revenue purposes." 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of unrealized foreign exchange loss of Rs. 1 ,35,46,050/ - in respect of the SEZ unit on the ground that section 43A deals with cases wherein the asset had been acquired from a country outside India whereas in the instant case the asset had been acquired in India, without appreciating that even as per the provisions of section 43A un realized foreign exchange loss is not allowable on reinstatement of the loan and is allowable only on actual payment thereof and therefore by the said analogy also unrealized foreign exchange conversion loss was rightly disallowed by the Assessing Officer as being a contingent liability on capital account and hence not allowable under 3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the assessee deduction of foreign exchange loss due to fluctuation in rates at the time of repaym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the External Commercial Borrowings (ECB) at the end of the year. According to the Assessing Officer such a loss was contingent in nature as it was only a notional loss liable to change at the time of subsequent actual payment in foreign currency. In relation to the loss of Rs. 73,83,330/- of STPI Unit, the Assessing Officer had disallowed the same on the ground that the same related to the repayment of ECB loans taken for setting-up of STPI unit and was capital in nature. Further, in relation to STPI Unit, the Assessing Officer also observed that as the loan was used to purchase assets, any loss on account of exchange fluctuation in the course of repayment of loan is a part of cost of asset in terms of section 43A of the Act. Both the disallowances made by the Assessing Officer has since been deleted by the CIT(A). As per CIT(A), loss arising due to reinstatement of the ECB loans at the year end could not be considered as contingent or notional in nature following the judgement of the Hon'ble Supreme Court in the case of CIT vs. Woodward Governor India Ltd., 294 ITR 451(SC). Further, with regard to the plea of the Assessing Officer that the ECB loan in relation to the STPI unit wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eating such loss as revenue in nature. The other plea of the Assessing Officer that since loss related to raising of foreign currency loans for acquiring an asset, such loss on account of rate fluctuation should go to add to the cost of the asset in terms of section 43A of the Act is also not tenable. Quite clearly, section 43A of the Act deal with an asset acquired by the assessee "from a country outside India" and in the present case it has been found by the CIT(A) that the asset acquired by the assessee by utilizing the foreign currency loans was from within India. Therefore, considering the entirety of facts and circumstances of the case, the CIT(A) made no mistake in allowing the claim of the assessee with respect to the foreign exchange loss of Rs. 1,35,46,050/- in respect of SEZ unit and of Rs. 73,83,330/- in respect of STPI Unit. Thus, so far as the Grounds of appeal No.1 and 3 are concerned, the same are dismissed. 7. Now we may take up Ground of appeal No.4 raised by the Revenue with regard to the determination of deduction under section 10A of the Act in relation to the STPI unit. In brief, the relevant facts are that during the year under consideration assessee had sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. In so far as the stand of the Revenue is concerned, the same is to the effect that though section 10A of the Act forms part of Chapter-III of the Act, but it being a deduction, its allowability is to be governed by Chapter VIA of the Act and considered in that light, Chapter-VI relating to the provisions of set-off and carry forward of losses be taken into account while computing the deduction allowable under section 10A of the Act. 11. We have considered the rival submission. At the outset, we may say that there is enough merit in the plea of the respondent-assessee that the said controversy is to be governed by the judgments of the Hon'ble Bombay High Court in the case of Black And Veatch Consulting Pvt. Ltd. (supra) as well as Techno Trap and Polymers Pvt. Ltd.(supra). The fact-situation in the case of Black And Veatch Consulting Pvt. Ltd. (supra) was that the Assessing Officer had computed the deduction under section 10B of the Act after reducing the brought forward loss of earlier years. The Hon'ble Bombay High Court disapproved the action of the Assessing Officer and the following discussion:- "Section 10A is a provision which is in the nature of a decision and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 10A of the Act are akin to a deduction available to the assessee and it is to be given effect to at the stage of computing profit and gains of business. The Hon'ble High Court noted that the attempt of the Revenue to telescope the provisions of Chapter VIA, in the context of the deduction under section 10A of the Act would be impermissible unless "a specific statutory provision" to that effect is made. In our view, the aforesaid observations of the Hon'ble Bombay High Court clearly answer the objections raised by the Revenue before us. Further, the judgment of the Hon'ble Bombay High Court in the case of Techno Trap and Polymers Pvt. Ltd.(supra) is also relevant, wherein the question of law before the Hon'ble Court was as under:- "(i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the brought forward unabsorbed loss/depreciation of the assessee's 10B unit was not liable for set off against the current year's profit of the same 10B unit." 11.2 The Hon'ble High Court answered the said question against the Revenue and the following discussion is relevant to reproduce:- "4. Mr. Suresh Kumar, learned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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