TaxTMI 
TaxTMI 
2014 (8) TMI 901
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....rtible Debentures carrying interest @15% per annum. In order to repay the debentures, the respondent-assessee borrowed money. The loan was taken against Foreign Currency Non Resident Loan Account [FCNR(B) Loan]. The advantage/benefit was that the loan was availed at a lower rate of interest as compared to interest payable on the normal loan account. In order to hedge against foreign exchange fluctuations, the respondent-assessee had entered into forward contracts with banks in India. The respondent-assessee incurred loss of Rs. 49,98,072/- on account of foreign exchange fluctuation on account of FCNR(B) Loan. The said amount was paid during the previous year relevant to the assessment year. 2. In the Assessment Order under Section 143(3)....
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....ns loss on loan account. 6. The aforesaid findings were reversed by the Commissioner of Income Tax (Appeals), who observed that the appellant had outstanding 15% Unsecured Redeemable Non-convertible Debentures of Rs. 100 Crores as on 31.03.1999 and these debentures were due for redemption in the financial year 1999-2000 (Assessment Year 2000-01). For repayment of debentures, the respondent-assessee had raised FCNR (B) Loan from banks on 27.01.2000 and loan was utilized for repayment of the debentures. The exercise of taking FCNR(B) Loan had resulted in reduction of financial expenditure as similar borrowing under a normal loan would have resulted in higher interest payment. The details with regard to the financial cost or interest rates ....
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....re repaid and new loans were taken on need to need basis. There was no foreign exchange loss on purchase of fixed assets as was stated in the Audit Report and also clear from the depreciation schedule as per the Companies Act, 1956 as well as Audit report as per the Act. Thus, the amount paid was for raising or repayment of loan and thus, was attributable to revenue account and not of capital nature. The reasoning given by the Commissioner of Income Tax (Appeals) is lucid and clear, and is worthy of reproduction: "10. I have gone through the facts of the case and submission of the Appellant and also to the remand report and rejoinder thereof. I have also perused the accounts of the assessee for the year under consideration and additional....
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....the, Ld. AO is wrong in applying the provisions of the section 43A in the present case, as from the fact is clearly evident that no assets were acquired by the assessee by raising the FCNR(B) loan by making the payment in foreign currency on acquisition of capital assets out of the borrowings of FCNR(B) loan as such amount is utilized for repayment of debentures. The submission of the assessee that initial rupee loan is borrowed for acquisition of fixed assets has been withdrawn by the appellant in the light of the facts discussed above, hence the theory that FCNR(B) loan has indirectly utilized for purchasing the fixed assets in foreign currency could not be applied on present facts, especially in the light of the fact that the appellant i....
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....ew of the above Supreme Court decision, the expenditure in question is an allowable expenditure and ground of the ld. AO that the Department had preferred an appeal in Hon'ble Supreme Court against that the order of the Hon'ble Delhi High Court in the case of CIT vs. Woodward Governor, 291 ITR 451 in the assessment order would not hold good after the decision of the Apex Court wherein the decision of the Hon'ble Delhi High Court has been upheld". 7. On appeal filed by the revenue, the aforesaid decision was affirmed by the Income Tax Appellate Tribunal. 8. Decision of the Delhi High Court in Woodward Governor India Pvt. Ltd. (supra) has been affirmed by the Supreme Court in decision reported as Commissioner of Income Tax, ....
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.... is actually received; (ii) whether the same system is followed by the assessee from the very beginning and if there was a change in the system, whether the change was bona fide; (iii) whether the assessee has given the same treatment to losses claimed to have accrued and to the gains that may accrue to it; (iv) whether the assessee has been consistent and definite in making entries in the account books in respect of losses and gains; (v) whether the method adopted by the assessee for making entries in the books both in respect of losses and gains is as per nationally accepted accounting standards; (vi) whether the system adopted by the assessee is fair and reasonable or is adopted only with a view to reducing the incidence of taxation". ....