PCIT Vs Galaxy Surfactants Ltd. (Bombay High Court)
Bombay High Court remanded the matter of correct treatment of losses arising due to exchange rate fluctuation since order doesn’t deal with import of Section 43A of the Income Tax Act and its interplay with section 37(1).
Facts- The captioned Appeal is a challenge to an order dated April 3, 2017 passed by the Income Tax Appellate Tribunal, Mumbai, allowing an appeal filed by Galaxy Surfactants Ltd., the Respondent-Assessee, setting aside the concurrent view of the Assessing Officer and the Commissioner of Income Tax Appeal in relation to the interpretation of Section 43A of the Income-tax Act, 1961, and allowing a certain expense as revenue expenditure.
The issue that lies is whether losses arising out of fluctuation of exchange rates in servicing a foreign currency loan that is utilized partly for acquiring assets from outside India and partly for acquisition of assets within India, should be entirely capitalised with the value of the assets acquired. According to the Appellant-Revenue, such losses ought to be entirely capitalised regardless of whether the asset is acquired from outside India or from within India. According to the Respondent-Assessee, the losses must be broken down in proportion to the value of assets acquired from outside India and from within India; and the portion attributable to utilisation for import of assets into India must be capitalised u/s. 43A of the Act, while the portion attributable to utilisation for acquiring assets from within India must be treated as revenue expenditure u/s. 37(1) of the Act.
