TMI Blog2019 (9) TMI 1116X X X X Extracts X X X X X X X X Extracts X X X X ..... cts, 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 observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with Accounting Standard 11 (AS-11) prescribed by the Institute of Chartered Accountants of India (ICAI). The interconnected issue involved therein is as to whether the ld. CIT(A) was justified in confirming the disallowance of foreign exchange loss above by holding that it is capital expenditure and cannot be allowed as deduction u/s.37(1) of the Act. 3. We have heard rival submissions. At the outset, we find that the assessee had borrowed ECB in earlier years and had restated the same at the exchange rate prevailing at the end of the year and had incurred exchange fluctuation loss thereon during the year in the sum of ₹ 2,92,79,250/-. This was debited to the profit and loss account by the assessee und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exchange loss arising there from would also take the character of capital expenditure and accordingly disallowed the same u/s.37(1) of the Act. The ld. AO had not granted depreciation of foreign exchange loss even though the same was treated as capital in nature. The ld. AO also applied the provisions of Section 43A of the Act in support of his contentions. We find that the ld. CIT(A) had observed that the provisions of Section 43A of the Act are not applicable to the facts of the instant case as admittedly the assets were purchased by the assessee only in India and not from abroad. We find that both the ld. AO as well as the ld. CIT(A) had observed that the exchange fluctuation loss arising due to re-statement of ECB loan at the year end e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change in facts when compared to earlier years. Even otherwise, we find that this issue is also squarely covered by the decision of Hon ble Supreme Court in the case of Woodward Governor India Ltd., reported in 312 ITR 254 wherein, among other aspects, it was also held that compliance to AS-11 of ICAI is mandatory for all companies registered in India. 3.2. We also find that the 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 of the Hon ble Supreme Court in the case of Tata Iron and Steel Company Ltd., reported in 231 ITR 285. He ..... X X X X Extracts X X X X X X X X Extracts X X X X
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