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Tribunal allows appeals on Foreign Exchange Loss disallowance, clarifies Sec.43A scope The Tribunal allowed the appeals by the assessee for A.Ys. 2012-13 and 2013-14, overturning the disallowance of Foreign Exchange Loss under Sec.43A of the ...
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Tribunal allows appeals on Foreign Exchange Loss disallowance, clarifies Sec.43A scope
The Tribunal allowed the appeals by the assessee for A.Ys. 2012-13 and 2013-14, overturning the disallowance of Foreign Exchange Loss under Sec.43A of the Income Tax Act. The Tribunal held that Sec.43A applied only to assets acquired from outside India, not indigenous assets acquired in India. Relying on the Pune Tribunal's decision, the Tribunal set aside the invocation of Sec.43A, allowing the assessee's grounds for both years. The appeals were allowed on June 7, 2019, reversing the previous decisions disallowing the Foreign Exchange Loss.
Issues: - Disallowance of Foreign Exchange Loss under Sec.43A of the Income Tax Act, 1961 for A.Ys. 2012-13 and 2013-14.
Analysis: 1. The appeals by the assessee stemmed from orders of the Commissioner of Income Tax (Appeals) for A.Ys. 2012-13 and 2013-14. Both parties agreed that the facts and issues were identical for both appeals, allowing the appeals to be heard together.
2. The primary issue revolved around the disallowance of Foreign Exchange Loss amounting to Rs. 25,28,675 by treating it as capital in nature under Sec.43A of the Act. The Assessing Officer (AO) disallowed the amount, considering it as capital expenditure for the purchase of capital equipment. The Commissioner upheld this decision, citing lack of clarity in the law for the relevant period. The AO's reliance on judicial decisions, particularly the Madras High Court ruling, supported treating the loss as capital expenditure due to RBI approval for capital asset purchase.
3. The assessee contended that Sec.43A applied only to assets acquired from outside India, not indigenous assets like those acquired in India. The Pune Tribunal's decision in Cooper Corporation Pvt. Ltd. Vs. DCIT supported this view. Consequently, the Tribunal set aside the invocation of Sec.43A, allowing the assessee's grounds.
4. As the facts and issues for A.Y. 2013-14 mirrored those of A.Y. 2012-13, the Tribunal allowed the grounds for both years. Therefore, the appeals for both A.Ys. were allowed, overturning the previous decisions disallowing the Foreign Exchange Loss.
5. The Tribunal pronounced the order on June 7, 2019, allowing both appeals by the assessee.
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