2025 (8) TMI 1643

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....ee had filed its return of income for A.Y. 2016-17 on 30.09.2016 declaring loss of Rs. 40,20,66,360/-. The case was selected for complete scrutiny. In the course of assessment, the AO found that assessee had claimed expense of Rs. 29,28,908/- on account forward contract premium expenses. It was explained by the assessee that forward contract expense was the cost for hedging foreign currency liability to reduce the foreign currency fluctuation premium loss. It was explained that the foreign currency loans were obtained by the assessee to acquire equipment which was used for the purpose of business. The AO, however, disallowed the forward contract premium expenses claimed by the assessee for the reason that identical issue was involved in ass....

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....s regard, the Ld. AR has drawn our attention to provision of Section 36(1)(iii) of the Income Tax Act, 1961 (in short 'the Act') and submitted that the interest paid in respect of capital borrowed for the purpose of business or profession was an allowable deduction. The Ld. AR further submitted that similar claim was allowed by the Revenue in assessee's own case in the earlier assessment years. 6. Per contra, Shri Santosh Kumar, Ld. Sr. DR supported the orders of the AO & the Ld. CIT(A). 7. We have carefully considered the rival submissions and perused the materials available on record. The AO had made the disallowance for the reason that identical claim made in the A.Y. 2014-15 was disallowed, which was upheld by the Ld. CIT(A) in that y....

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....ises whether such premium paid by the assessee to secure the fluctuation in the foreign currency is subject matter of the provisions of section 43A of the Act. In our considered view the provisions of section 43A of the Act deals with the loss/gain with respect to the liability in foreign currency for the assets acquired from a country outside India. In other words, it does not deal with respect to the cost incurred by the assessee to secure the loss which may arise at the time of repayment on account of fluctuation in the exchange rate with respect to foreign currency liability which was recorded in the books of the assessee in Indian currency. Thus once the provisions of section 43A of the Act are not applicable on the deduction claimed b....

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.... the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Hence the grounds of appeal of the assessee is allowed." 8. Since the disallowance made by the Revenue in the A.Y. 2014-15 stands deleted by the Co-ordinate Bench of this Tribunal and the addition in the current year was made only on the ground that identical addition was made in the A.Y. 2014-15; we do not find any reason to sustain the addition as made by the AO in the current year. However, the Ld. CIT(A) had sustained the addition in the current year on the ground that the assessee had availed the loans for the purpose of buying plant and machinery and thus the premium paid for forward cover was on account of loan taken for capital purposes. Accor....