M/S. EGGER PUMPS INDIA PVT. LTD.,COIMBATORE vs. ITO, CORPORATE WARD-1,, COIMBATORE

1. This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/Addl./JCIT(A)-10, (hereinafter referred to as “the Ld.CIT(A)”), Mumbai, dated 04.11.2024 for the Assessment Year (hereinafter referred to as "AY”) 2011-12.

The sole issue is against the action of the Ld.CIT(A) confirming the action of the AO who held that the loss on account of foreign exchange fluctuation on restatement of External Commercial Borrowings (ECB)

amounting to Rs.7,02,000/- was Revenue expenditure [and not capital in nature] and therefore, he disallowed it by passing order u/s.143/147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act‘) by order dated 04.07.2018.

Aggrieved the assessee preferred an appeal before the Ld.CIT(A) who has confirmed the action of the AO by taking note of the fact that this Tribunal in the assessee’s own case [ITA No.477/Mds/2017 order dated 01.09.2017] for AY 2012-13 has upheld the action of the AO/Ld.CIT(A) on this issue by holding as under:

We have heard both the parties and perused the material available on record. We note that the assessee company is engaged in manufacture of industrial pumps. For the AY 2011-12, the return of income was filed on 07.11.2011 admitting income of Rs.48,28,789/- and book profit of Rs.75,88,530/- u/s.115JB of the Act. M/s. Emile Egger & CIE SA, Switzerland is the parent company of the “Egger Pumps India Private Limited” (assessee). The Parent company during the year 2006, advanced loan amounting to Euros 3,24,982.65 as External Commercial borrowings (ECB). The said ECB was outstanding and the same was restated at the end of the year. Consequently, the Appellant booked a notional foreign exchange fluctuation loss of Rs.36,95,418/-cumulatively for 3 AY’s i.e. AY 2010-11, 2011-12 & 2012-13. For the AY 2011-12, the Appellant has claimed forex loss of Rs.7,02,000/- on restatement of ECB and the same was debited in the Profit & Loss account. Later, the case of assessee for AY 2011-12 was reopened and the AO concluded that since the CIT(A) and ITAT held that the Forex Loss on restatement is capital in nature, deduction was not allowable. On appeal, the Ld.CIT(A) confirmed the action of AO citing the orders of his predecessor CIT(A) and that of ITAT for subsequent AY 2012-13.

Before us, the Ld.AR couldn’t controvert the aforesaid facts that the Tribunal has taken a view against the assessee on this issue and the AO as well as the Ld.CIT(A) has followed the ratio as laid down by this Tribunal for AY 2012-13. According to the Ld.AR, the assessee has already preferred an appeal before the Hon’ble Madras High Court against the action of this Tribunal for AY 2012-13 and the said appeal has been admitted by the Hon’ble High Court and contended that the Ld.CIT(A) erred in simply following his predecessors view on the issue.

In the present case, it is noted that the loan has been given by the parent company for the purpose of acquisition of capital asset and correspondingly the loan is in the capital field and the loss arising on account of restatement of the liability, which is in the capital field to be considered as capital nature and it is a capital loss cannot be considered as deduction while computing the income of assessee as a business expenditure.

In the light of the aforesaid decision of this Tribunal on the issue in hand for AY 2012-13, we don’t find any infirmity in the action of the Ld.CIT(A) and confirm it since no change in the facts or law could be pointed out by either parties. Therefore, respectfully following the decision of this Tribunal in the assessee’s own case for AY 2012-13, we dismiss the appeal of the assessee.

In the result, appeal filed by the assessee is dismissed. Order pronounced on the 18th day of June, 2025, in Chennai.