Even if there is no evidence to the effect that the borrowed forex loan was utilised for the purpose of business, the loss arising out of foreign exchange fluctuation can be allowed based on past history
M/s. Perfetti India Ltd. Vs. ACIT (ITAT Delhi) Considering all the aspects and principle of consistency propounded by the Hon’ble Supreme Court in the case of Radha Swami Satsand vs. ITO reported in 193 ITR 321, we are of the opinion that loss suffered by the assessee on account of exchange rate fluctuation is allowable expenditure in this year also. The assessee may not be able to produce evidence of the utilisation of the capital before the AO but from the orders of the AO in earlier years and in subsequent years impliedly, it is ascertainable that it is used for the working capital which is in a revenue account.
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : ‘A’ NEW DELHI
BEFORE SHRI G.E. VEERABHADRAPPA, VICE PRESIDENT AND
SHRI RAJPAL YADAV, JUDICIAL MEMBER
I.T.A No. 4976/Del/02 Asstt. Year : 1998-99
M/s. Perfetti India Ltd. Vs. ACIT,
ORDERPER RAJPAL YADAV : JM
The assessee is in appeal before us against the order of Ld. CIT(A) dated 31st October,2002 passed for asstt. year 1998-99. The appeal of the assessee was decided by the Tribunal vide its order dated 22nd April, 2004. Assessee carried the matter in appeal before the Hon’ble High Court vide ITA No. 650/2004. Hon’ble High Court has dismissed the appeal of assessee vide order dated 6.12.2004. The assessee had filed miscellaneous application bearing number 133/D/2005. This miscellaneous application was also dismissed by the Tribunal vide its order dated 15th June, 2005. The assessee had filed a SLP before the Hon’ble Supreme Court challenging the orders of the Tribunal as well as of the Hon’ble High Court. Hon’ble Supreme Court has set aside the orders of the Hon’ble High Court as well as of the Tribunal and remitted the issue back to the Tribunal for deciding the issue denovo. The order passed by the Hon’ble Supreme Court on 2nd December, 2010 in civil appeal No. 10219 of 2010 read as under
“Heard learned counsel on both sides.
Having examined the facts and circumstances of the case, which pertains to Assessment year 1998-1999, and particularly in the light of the orders passed for the earlier assessment years 1996-97 and 1997-98 as also having regard to the Assessment orders passed in the following year [1999-2000] and in view of the judgment of this court in the case of Commissioner of Income Tax vs. Woodward Governor India Private Limited, reported in  312 ITR 254, we are of the view that the Income Tax Appellate Tribunal [‘Tribunalç for short] was wrong in refusing to rectify it’s own order under section 254(2) of the Income Tax Act, 1961, particularly when it has failed to appreciate that, in any event, the expenditure could have fallen on the Capital Account, which was specifically pleaded by the assessee as an alternate submission. [See page 73 of the SLP Paper Book]
For the afore-stated reasons, the impugned judgment of the High Court is set aside and the matter is remitted to the Tribunal. We direct the Tribunal to decide the matter de novo in accordance with the law laid down by this Court in the case of Woodward Governor India Private Limited [supra] as well as on the merits of this case.
The civil appeal is, accordingly, allowed.
No order as to costs”
4. We have duly considered the rival contention and gone through the record carefully. The assessee has placed on record copies of the asstt. order as well as Tribunal’s order in asstt. year 1997-98 and 1999-2000. He has placed on record all the details in a tabular form on pages 93-94 of the paper book. In these details, it has been highlighted by the assessee that in asstt. year 1996-97 a loss on account of fluctuation in exchange rate was accrued at ~ 32,20,000/-. It was allowed by the AO. In 1997-98, it was ~ 14,20,000/-. It was disallowed by the AO but allowed by the Ld. CIT(A). This view has been upheld upto the Hon’ble High Court. In asstt. Year 1999-00 ~ 27,40,000/- was claimed by the assessee. It was disallowed by the AO and Ld. CIT(A) but allowed by the Tribunal. The loan was taken in 1995. Its character was ascertain as a working capital in asstt. Year 1996-97 by the AO himself. According to the assessee, it has become part of circulating capital. Considering all these aspects and principle of consistency propounded by the Hon’ble Supreme Court in the case of Radha Swami Satsand vs. ITO reported in 193 ITR 321, we are of the opinion that loss suffered by the assessee on account of exchange rate fluctuation is allowable expenditure in this year also. The assessee may not be able to produce evidence of the utilisation of the capital before the AO but from the orders of the AO in earlier years and in subsequent years impliedly, it is ascertainable that it is used for the working capital which is in a revenue account.
Respectfully following the decision of Hon’ble Supreme Court in the case of CIT Vs. Woodword Governor India Private Ltd. and the past history of the dispute on this issue, we allow this ground of appeal and delete the disallowance. This is the only issue remitted before us for our adjudication.
5. In the result, appeal of the assessee is allowed on this issue.
Order pronounced in the open court on 6th May, 2011.