2019 (9) TMI 1116

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....1961 (hereinafter referred to as Act) dated 09/03/2015 by the ld. Dy. Commissioner of Income Tax, Circle - 13(1)(2), Mumbai (hereinafter referred to as ld. AO). 2. The first issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in confirming the disallowance of foreign exchange fluctuation loss of Rs. 2,92,79,250/- arising out of re-statement of External Commercial Borrowings (ECB) at the year end rates 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....

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.... at the year end exchange rates in accordance with AS-11 issued by ICAI which is mandatorily to be complied with by the assessee as per Section 211(3C) of the companies Act, 1956. The assessee had debited this exchange loss in its P & L account in the sum of Rs. 2,92,79,250/- and claimed the same as deduction in the return of income. The ld. AO held that the ECB was used for capital purposes by the assessee, the 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 su....

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.... revenue in the earlier years in scrutiny proceedings as tabulated hereinbelow:- 3.1. Hence, going by the principle of consistency which has been upheld by the Hon'ble Supreme Court in the case of Radhasaomi Satsang reported in 193 ITR 321, there is no reason for the ld. AO to take a divergent stand during the year under consideration by disallowing the foreign exchange loss, when there is no 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 Ind....