Tribunal permits claim for exchange rate loss on foreign currency loan as revenue expenditure

The Tribunal allowed the assessee's claim for exchange rate fluctuation loss on a foreign currency loan as a revenue expenditure under Section 37(1) of the Income-tax Act. The judgment overturned lower authorities' decisions, relying on the Pune Bench's analysis. The appeal was allowed, directing the Assessing Officer to permit the claimed loss due to exchange rate fluctuation on the foreign currency loan as a revenue expenditure.

---

---

Issues:
1. Claim of exchange fluctuation loss
2. Additional depreciation claim

Analysis:
1. The appeal concerned two main issues: a claim of exchange fluctuation loss and an additional depreciation claim. The assessee availed a term loan in Indian rupees, later converted into a foreign currency loan. The Assessing Officer disallowed the claimed loss due to fluctuation in foreign currency. The Ld. representative argued that similar cases allowed such losses under Section 37(1) of the Income-tax Act, citing relevant judgments. The Departmental Representative contended that since the loan was for acquiring a capital asset, the loss was not allowable as revenue expenditure.

2. The Tribunal analyzed the Apex Court's judgment in Tata Iron And Steel Co. Ltd., stating that exchange rate fluctuations do not affect the cost of depreciable assets for depreciation calculation. Referring to the Pune Bench's decision in Cooper Corporation Pvt. Ltd., it noted that losses from currency fluctuation may be recognized in the Profit & Loss account. The Tribunal highlighted the distinction between revenue and capital assets in determining the nature of such losses. It ultimately relied on the Pune Bench's findings to allow the assessee's claim for exchange rate fluctuation loss as a revenue expenditure under Section 37(1) of the Act.

3. The Tribunal concluded that the claim of the assessee for the exchange rate fluctuation loss on the foreign currency loan should be allowed as a revenue expenditure, overturning the decisions of the lower authorities. The judgment was based on the Pune Bench's analysis and findings, emphasizing the applicability of Section 37(1) of the Act in this context. As a result, the appeal filed by the assessee was allowed, directing the Assessing Officer to permit the claimed loss suffered due to exchange rate fluctuation on the foreign currency loan as a revenue expenditure.

---