Case Law Details
Steril-Gene Life Sciences Pvt. Ltd. Vs DCIT (ITAT Chennai)
Introduction: Explore the intricacies of the case involving Steril-Gene Life Sciences Pvt. Ltd. and the Deputy Commissioner of Income Tax (DCIT) as they navigate through the treatment of forex loss on a foreign currency term loan (FCTL). The core contention revolves around whether the forex loss should be considered as revenue expenditure or capital expenditure. Additionally, the article delves into the alternate claim made by the assessee regarding the impact on machinery cost and depreciation.
Detailed Analysis: The article provides a comprehensive analysis of the case, highlighting that Steril-Gene Life Sciences claimed a forex loss of Rs.81,66,986 during the financial year 2012-13, pertaining to the assessment year 2013-14. The loss was attributed to a foreign currency term loan obtained from Indian Overseas Bank, specifically for the purchase of machinery. The company asserted that the forex loss should be treated as revenue expenditure in the form of financial cost.
However, the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] contested this claim, asserting that the forex loss was capital in nature since the loan was utilized for acquiring capital assets, i.e., machinery. The CIT(A) affirmed the AO’s decision, leading to Steril-Gene Life Sciences challenging the verdict before the Tribunal.
While upholding the lower authorities’ decision regarding the forex loss being treated as capital expenditure, the Tribunal acknowledged the alternate claim made by the assessee. The alternate claim focused on the recognition of the forex loss as part of the cost of the asset (machinery), thereby affecting the calculation of depreciation.
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