2022 (6) TMI 1278

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....ement / revaluation of foreign currency loans due to adverse foreign exchange fluctuations claimed under section 37(1) of I.T. Act. 3. The brief facts necessary to appreciate the controversy involved in this appeal are as follows:- 3.1 The assessee company is engaged in the business of construction of development of real estate properties in India. The assessee filed its return of income on 31/10/2017 declaring total loss of Rs.130,42,10,334/- and book profit under section 115JB at Rs.73,95,741/-. The return of income was revised on 03/11/2018 declaring total loss of Rs.133,04,50,754/- and book profit under section 115JB of Rs.80,92,013/-. Assessee's case was selected for scrutiny and assessment order under section 143(3) of I.T. Act was ....

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....essee had outstanding loan given to the tune of Rs.17,92,52,695/- which was given to its foreign subsidiary, M/s Lodha Developers International (Netherlands) B.V. Ltd where the receivable was amounting to GBP 21,46,574/-. The said loan was restated / revalued at Rs.15,22,93,229/- in accordance with the method of accounting followed by the assessee and the provisions of section 43AA of the I.T. Act read with Income Computation Disclosure Standards (ICDS)-VI thereby incurred foreign exchange loss of Rs.2,69,59,466/-. The same was claimed as deduction while computing the total income. The Assessing Officer as well as the Ld.CIT(A) had disallowed the said loss on the ground that it was capital expenditure and not revenue expenditure and the sam....

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.... and its foreign subsidiary as trade / business purpose, the Assessing Officer in the assessment order has not specified the said reason but has only decided on the fact that the assessee has specified the said loan under the head "current assets" instead of trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading asset by relying on the decision of the Hon'ble Supreme Court in Sutlej Cotton Mills Ltd vs CIT 116 ITR 1 (SC). Furthermore, the Assessing Officer has not stated that the assessee has not produced any evidence to show that it was business / trading transaction, which ground was only taken up by the CIT(A) in the appellate proceedings. 8. Considering the facts of the case, we infer ....