Tribunal directs reassessment of forex loss as capital expenditure for 2014-15

The Tribunal allowed the appeal for statistical purposes, directing the Assessing Officer to reconsider the disallowance of foreign exchange fluctuation loss as capital expenditure for the assessment year 2014-15, emphasizing consistency in treatment.

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Issues Involved:
1. Disallowance of foreign exchange fluctuation loss as capital expenditure.

Analysis:
The appeal was filed against the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2014-15. The assessee, engaged in manufacturing automotive components, declared Nil total income but incurred a loss due to foreign currency fluctuation on advance from customers, loans in foreign currency, and interest payments. The Assessing Officer considered this loss as capital in nature since the loans were taken for acquiring capital assets, leading to disallowance and addition to total income. The assessee's appeal to the first appellate authority was unsuccessful, resulting in the current appeal.

The assessee argued that the foreign exchange fluctuation loss should not be treated as capital expenditure, as it was incurred on loans taken for both capital asset acquisition and general business purposes. The Assessing Officer had allowed proportionate disallowance for a similar issue in the subsequent assessment year, which the assessee requested to be applied in this case. The Department, however, supported the CIT(A)'s decision. After considering both sides, the Tribunal noted that the exchange loss included amounts related to loans for capital assets. As the Assessing Officer had allowed proportionate disallowance in a later assessment year, the Tribunal decided to set aside the appeal and direct the Assessing Officer to reconsider the issue, emphasizing consistency in treatment.

In conclusion, the Tribunal allowed the appeal for statistical purposes, instructing the Assessing Officer to review the disallowance issue in light of the treatment in the subsequent assessment year.

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