Hyderabad Yadgiri Tollway Private Limited Vs PCIT (ITAT Ahmedabad)
Forex Loss Claimed in One Go Invalid – AO’s Lapse Invites 263 Revision – ITAT Ahmedabad Upholds PCIT’s Action; ITAT Upholds 263: AO Failed to Enforce ICDS-VI on Foreign Exchange Loss; Exchange Loss Accounting: Claim Must Be Annual, Not Cumulative on Loan Repayment; PCIT Intervention Justified: AO’s Lack of Inquiry on Forex Loss Claim.
The assessee, an SPV executing the Hyderabad–Yadgiri highway project under NHAI, filed return declaring a loss of ₹37.84 crore. PCIT invoked section 263, finding that the AO wrongly allowed deduction of ₹28.72 crore as foreign exchange loss on repayment of external commercial borrowings (ECB) in one go, without verifying year-wise fluctuation impact.
PCIT observed that under AS-11 & ICDS-VI, exchange differences on foreign currency loans must be recognised annually at balance sheet dates, not on full repayment. He found that only ₹2.34 lakh pertained to the current year, making the AO’s order erroneous & prejudicial to revenue.
Before ITAT, the assessee argued that section 43A did not apply since the ECB was not for asset acquisition, that section 43AA governed the claim, and that the AO had examined the issue during assessment. The Tribunal, however, held that the AO merely accepted the assessee’s explanation without enquiry and failed to test compliance with ICDS-VI.
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