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Facts
The assessee, a Cost Accountant, remitted USD 125,000 under the LRS to obtain permanent residency in Georgia, later repatriating USD 123,225. Due to exchange rate fluctuations, an exchange loss of Rs. 6,91,662 was incurred and claimed as a deduction under Section 57(iii) in a revised return. The AO and subsequently the CIT(A) disallowed this loss, deeming it a personal expenditure unrelated to earning income from other sources, and also levied interest under Section 234D.
Held
The Tribunal upheld the orders of the lower authorities, confirming that the exchange loss was not deductible under Section 57(iii) as the expenditure was incurred for securing permanent residency and not for the purpose of earning income. Consequently, the disallowance of the loss and the levy of interest under Section 234D were affirmed.
Key Issues
Whether an exchange loss incurred for obtaining permanent residency in a foreign country is deductible under Section 57(iii) of the Income Tax Act, and if the consequential interest under Section 234D is applicable.
Sections Cited
143(3), 143(3A), 143(3B), 57, 57(iii), 234D, 139(5), 143(2), 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
fu/kZkj.ko"kZ@AssessmentYear : 2018-19 Shri Rama Kant Saboo cuke The ACIT Vs. C-4A, Panchsheel Colony, Ajmer Road Circle-7 Jaipur Jaipur – 302 019 LFkk;hys[kk la-@thvkbZvkjla-@PAN/GIR No.: AFEPS 7339K vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby : Shri Ashok Kanodia, CA jktLo dh vksjls@Revenue by: Shri Gautam Singh Choudhary, JCIT-DR lquokbZ dh rkjh[k@Date of Hearing : 16/09/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 28 /10/2025 vkns'k@ORDER PER: DR. S. SEETHALAKSHMI, J.M. This appeal filed by the assessee is directed against the order of learned Commissioner of Income Tax, National Faceless Appeal Centre, Delhi[ for short CIT(A)] dated 06.09.2024 for the assessment year 2018-19 raising therein following grounds of appeal. ‘’1. Under the facts and circumstance of the case, learned CIT(APPEALS) was not justified while confirming the assessment order passed by AD u/s 143 (3) read with section 143 (3A) and 143 (3B) of the Income Tax Act 1961 SHRI RAMA KANT SABOO VS ACIT, CIRCLE-7, JAIPUR
2. Under the facts and circumstance of the case learned CIT(APPEALS) was not justified while confirming the order passed by learned Assessing Officer completing the assessment on total income of RS 3,41,8722
3. Under the facts and circumstance of the case learned CIT(APPEALS) was not justified while confirming the order passed by learned Assessing Officer disallowing exchange loss difference amounting to Rs 6,91,662.00 US 57(iii) without verifying its genuineness.
4. Under the facts and circumstance of the case, learned Assessing Officer was not justified while levying interest u/s 234 D amounting to Rs 24,695/-.
2.1 Apropos grounds of appeal of the assessee, it is noticed that the ld. CIT(A) has dismissed the appeal of the assessee by confirming the action of the AO. The narration so made by the ld.CIT(A) at para 5.2.3 to 5.2.4 and 5.3 in his order is reproduced as under:- ‘’5.2.3 Having duly considered the facts on record and the appellant's submissions it is noted first of all, that the appellant is earning income from his profession as a cost account, salary income and capital gains. As seen from Revised ITR filed under IFOS he has declared interest income of Rs. 123632 and Expenses/Deductions at Rs. 943662 resulting in under IFOS at Rs. 820030/- This is set off aganst Total Income of Rs. 3769493. Whereas in the original return loss under IFOS was at Rs. 128368. Thus the loss clamed was revised upward by Rs 691662. The appellant has explained that this loss was on account of forex loss incurred on remittance of US$ to Georgia for getting Permanent residence and has claimed the same u/s 57. In this regard, it is pertinent to note that, as per section 57 the deduction (over and above the specified deductions in the other clauses) that can be made from the income chargeable under the head "Income from other source is "any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income.’’ In the appellant's case, the facts on record show that the expenditure that was incurred was of a personal nature Le it was incurred in the course of making an application for permanent residency in Georgia. This is a purely personal expenditure and there is no connection whatsoever of such expenditure with the earning of any Income from other Sources. The crucial issue is not of genuineness of expenditure of of claim made in revised return or even of whether SHRI RAMA KANT SABOO VS ACIT, CIRCLE-7, JAIPUR such income was earned or not. but of allowability of such claim of expenditure u/s 57 As clearly pointed out by the AO the expenditure was not at all expended for earning such income under the head Other Sources 5.2.4 In the case relied upon by the appellant, the stand of the Revenue was that making or earning of income, was a sine qua non to the admissibility of the expenditure under section 57() and, therefore, if in a particular assessment year there was no income, the expenditure would not be deductible under that section. Against this the Apex Court held as under:-
What section 57 (iii) requires is that the expenditure must be laid out or expended wholly and exclusively for the purpose of making or earning income. It is the purpose of the expenditure that is relevant in determining the applicability of section 57(iii) and that purpose must be making or earning of income. Section 57(iii) does not require that this purpose must be fulfilled in order to qualify the expenditure for deduction. It does not say that the expenditure shall be deductible only if any income is made or earned. There is in fact nothing in the language of section 57(iii) to suggest that the purpose for which the expenditure is made should fructify into any benefit by way of return in the shape of income. The plain natural construction of the language of section 57(iii) irresistibly leads to the conclusion that to bring a case within the section, it is not necessary that any income should in fact have been earned as a result of the expenditure. The above judgement in fact goes against the appellant's contention as the Apex Court has clearly pointed out that the purpose of the expenditure is the deciding factor in allowability of deduction u/s 57(iii). In the present case the expenditure was not incurred for the purpose of earning any income (from other sources) but for securing permanent residency status in a foreign country. No further arguments need to be discussed nor are relevant in the present context. In view of the above, the action of the A.O in disallowing the claim for the loss of Rs 6,91,662/- under section 57 of the Act, is upheld and the appellant's grounds are dismissed.’’ 5.3 Ground of appeal No. 4 is against the levy of interest u/s 234D amounting to Rs.24,695/-. As charging of interest u/s 234D is automatic, statutory, mandatory and consequential, AO is directed to compute and levy interest as per law. This ground is dismissed.
SHRI RAMA KANT SABOO VS ACIT, CIRCLE-7, JAIPUR 2.2 During the course of hearing, the ld. AR of the assessee prayed that lower authorities are not justified in disallowing the claim for the loss of Rs.6,91,662/- u/s 57 of the Act and also directed the AO to compute the levy of interest as per law amounting to Rs.24,695/- u/s 234D of the Act. The written submissions as adduced by the ld. AR of the assessee is reproduced as under:- ‘’Written Submission on Behalf of the Appellant To, The Hon’ble Members of the Bench, Income Tax Appellate Tribunal, Jaipur Respected Hon’ble Members, This submission is respectfully made on behalf of the appellant, Shri Rama Kant Saboo, challenging the disallowance of exchange loss of ₹6,91,662 claimed under Section 57(iii) of the Income-tax Act, 1961, and consequential levy of interest under Section 234D, as upheld by the learned CIT(A) for Assessment Year 2018–19. I. Facts of the Case 1. The appellant, a professional Cost Accountant, purchased USD 1,25,000 through ICICI Bank under the Liberalized Remittance Scheme (LRS) for purposes related to obtaining a resident visa for Georgia.
2. The remittance was made entirely through official banking channels. Subsequently, USD 1,23,225 was received back through the same channel and converted into INR.
3. Due to exchange rate fluctuations between the dates of remittance and re-conversion, the appellant incurred an actual loss of ₹6,91,662, as certified by the bank and supported by verifiable transaction records.
4. This exchange loss was claimed in a revised return filed under Section 139(5) after discovery of its omission in the original return. All transactions were genuine, traceable, and evidenced through banking documentation. No part of the loss was found to be fictitious, capital, or personal in nature.
SHRI RAMA KANT SABOO VS ACIT, CIRCLE-7, JAIPUR II. Core Legal Submissions 1. Deductibility under Section 57(iii) Section 57(iii) permits deduction of any expenditure, not being capital in nature, laid out wholly and exclusively for the purpose of making or earning income under the head “Income from Other Sources.” The Hon’ble Supreme Court in CIT v. Rajendra Prasad Moody (1978) 115 ITR 519 (SC) held that it is not necessary that expenditure must result in income; it is sufficient if the expenditure is incurred with a view to earn income. Similarly, in Eastern Investments Ltd. v. CIT (1951) 20 ITR 1 (SC), the Apex Court observed that an expenditure need not yield immediate profits, but must be connected with or incidental to the earning of income. In the present case, the exchange loss directly arises from remittance and reconversion of funds through authorized banking channels, and represents a commercial incident of the transaction, not a capital or personal outlay. The appellant’s intent was bona fide — the foreign exchange was remitted and subsequently re-converted through recognized financial institutions, and the resultant fluctuation is a normal business-like risk attached to such banking transactions.
2. Revised Return Filed in Good Faith The appellant filed a revised return under Section 139(5) immediately after realizing that the exchange loss had been inadvertently omitted in the original return. The statutory right to revise is intended precisely to rectify such omissions and ensure accurate computation of income. The Revenue cannot disregard a claim made through a valid revised return merely on procedural grounds. The CBDT’sCircular No. 14 (XL-35), dated 11.04.1955, also directs that the officers of the Department should assist taxpayers in securing lawful reliefs, even if not claimed initially. The genuineness of the loss is evidenced through bank records and certificates which have not been disputed or disproved by the AO. The disallowance, therefore, lacks both factual and legal foundation.
3. Direct Nexus and Commercial Nature of Transaction The Hon’ble ITAT Jaipur in Kailash Chand Soni v. ACIT (ITA No. 960/JP/2019) has held that where there exists a nexus between the expenditure and the income source, deduction under Section 57(iii) is justified. The Department’s assumption that the remittance was “personal” overlooks the commercial and financial character of the banking transactions undertaken under the LRS. The fluctuation in foreign exchange is a natural incident of such transactions and not a personal expenditure.
SHRI RAMA KANT SABOO VS ACIT, CIRCLE-7, JAIPUR The loss has arisen wholly in the course of managing the remitted funds and not for acquisition of any capital asset or personal use. Hence, the same squarely falls within the purview of Section 57(iii).
4. Principle of Real Income and Consistency In subsequent assessment years, the appellant has duly disclosed and offered for tax foreign exchange gains under the head “Income from Other Sources.” The consistency of such treatment demonstrates transparency and establishes that both exchange gains and losses have been recognized on the principle of real income, as emphasized by the Hon’ble Supreme Court in Sathappa Textiles Ltd. v. CIT (1961) 42 ITR 409 (SC). Once the department has accepted such gains as taxable, corresponding losses cannot be selectively disallowed, as income and loss from the same source must be treated on parity. III. Prayer In view of the facts and legal position discussed above, it is most humbly submitted that:
1. 1. The disallowance of ₹6,91,662, being genuine foreign exchange loss, be deletedas it is allowable under Section 57(iii) of the Act.
2. The interest levied under Section 234D, being consequential, may kindly be deleted.
3. Such other or further reliefs as this Hon’ble Tribunal may deem fit in the interest of justice may kindly be granted. To support his submission, the ld. AR of the assessee has filed the following paper books dated 19-03-2025 and 16-06-2025. S.N. Particulars (Index dated 19-03-2025) Page No.
1. Written Submission 1-10 2. CIT(A) Order 11-20 3. Chart of Exchange Difference 21-21 4. AO Order 22-25 5. CBDT Circular No. 14 (XL-35) of1955 dated 11-04-1995 26 S.N. Particulars (Index dated 16-06-2025) Page No.
1. Covering letter (subject: compliance with the Hon’ble 27 Bench direction dated 17-06-2025 – submission of Affidavit and Exchange Receipt 2. Affidavit (deposing that on 29-11-2016, the assessee 28 SHRI RAMA KANT SABOO VS ACIT, CIRCLE-7, JAIPUR remitted an amount of USD 125,000 under the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India for the purpose of obtaining Permanent Residency (OR) in Georgia, through authorized banking channel, at the then prevailing exchange rate ofRs.69,365 per USD amounting to Rs.86,70,265/-.
That subsequently on 28-12-2017 & on 8-01-2018, a sum of USD 123,225 was repatriated and credited to my Indian Bank Account at the average exchange rate of Rs.63,752 per USD, resulting a credit of Rs.78,55,856/- (Rs.77,32,631 on 28-12-2017 & Rs.1,23,225 on 8-01-2018.
That due to the difference in exchange rates between the time of remittance and repatriation, a foreign currency loss of Rs.6,91,662/- was incurred, calculated at the difference of Rs.5.613 per USD on 123,225 USD.
3. That Although the remittance was made with the intention to obtain Permanent Residency (PR) in Georgia, the jounrney and associated steps also involved evaluating potential opportunities for investment in banking, financial securities and other business avenues abroad.
That the remittance was made lawfully under the Liberalised Remittance Scheme (LRS) and the foreign exchange loss incurred is genuine, arising fro authorized transactions and fluctuations in currency value.
That the purpose of remittance was not purely personal or capital in nature but included broader financial intentions aligned with global investment prospects.
Copy of Purchase Bill (Transaction Advice from ICICI 29 Bank 4. Copy of Sale Bill (ICICI Bank Invoice No.0191- 30 13740515168 invoice Date: 2017/12/28 Transaction reference WR 13740515168 Amount USD 123225 Remittance Service Rs. 0 charges SHRI RAMA KANT SABOO VS ACIT, CIRCLE-7, JAIPUR Value of supply 12234.83 Conversion Rate 62.77 Gross INR amount INR 7734833.25 Goods & Services Tax 2202.27 (GST) Total amount credited INR 7732630.98 Date of credit 2017/12/28 2.3 On the other hand, the ld. DR supported the orders of the lower authorities. 2.4 We have heard both the parties and perused the materials available on record. Brief facts of the case are that the case of assessee was selected for Complete Scrutiny Assessment under the E-Assessment Scheme, 2019 on the issue of ‘’Reduction of Income in Revised Return & Claim of Refund. The Notice u/s 143(2) / 142(1) of the Act was issued respectively electronically. In response to those notices, the assessee filed requisite information / details through electronically which are mentioned at page 1 to 4 of the assessment order. It is noted that the AO assessed the income of the assessee amounting to Rs.34,18,720/- by disallowing of exchange loss of Rs.6,91,662/- u/s 57 (iii) of the Income Tax Act, 1961. The observations as made by the AO in the assessment order is reproduced as under:- ‘’Accordingly, the net taxable income of the assesee after considering the above discussions comes as under:-
SHRI RAMA KANT SABOO VS ACIT, CIRCLE-7, JAIPUR Total income as per Return Rs.27,27,060/- Add:Claim of loss from Rate of Fluctuation Rs. 6,91,662/- On Foreign Currency (as discussed above) Assessed Income Rs.34,18,772/- R/o Rs.34,18,720/- Assessed u/s 143(3) of the Act on assessed income Rs.34,18,720/- as above. Tax and Interest on above assessed total income works out on computation sheet which is also the part of order.’’ In first appeal, the ld. CIT(A) has confirmed the action of the AO and thus dismissed the grounds of appeal raised before him. It is noted that the Assessee is a Cost Accountant and is showing total income from Consultancy, capital gain and other income like interest and dividend. It is noted that the assessee during the year under consideration went to Georgia for getting resident VISA. For this purpose, the assessee purchased US Dollar 125000.00 from ICICI Bank being authorized dealer. Out of which the assessee received back US Dollar 123225.00 and these dollars were received through ICICI Bank and thus he suffered loss amounting to Rs.6,91,662/- and the same was claimed by the assessee from income from other sources and thus showed returned income amounting to Rs.27,27,060/-. The AO completed the assessment on the total income of Rs.34,28,730/- by making addition of Rs.6,91,222/- being exchange loss difference and this loss has been calculated on US Dollar SHRI RAMA KANT SABOO VS ACIT, CIRCLE-7, JAIPUR 123225 which was received back from Georgia on 28-12-2017 . This loss was claimed by the assessee out of the income shown u/s 57(iii) of the Act. It is noted that all the information had been submitted by the assessee to the AO but he without looking to the genuineness of the transactions added this amount ofRs.6,91,662/- in the hands of the assessee and the ld. CIT(A) confirmed the action of the AO. Record reveals that the case of the assessee was selected to verify the reduction of Income in Revised Return and claim of refund and thereby from the details placed on record the AO categorically had given his finding that the claim of foreign currency loss being the decision for his private affairs and has not direct relation to income offered by the assessee and thereby the AO rightly made the addition in the hands of the assessee. Even the ld. CIT(A) has rightly rejected the claim of the assessee by observing that the expenditure was not incurred for the purpose of earning any income but for the securing permanent residency status in a foreign country in view of the above clear finding in the orders of the lower authority we see no reason interfere in the finding of the lower authority and thereby the appeal of the assessee is dismissed.
Sd/- Sd/- ¼jkBksM deys'kt;UrHkkbZ ½ ¼MkWa-,l-lhrky{eh½ (RATHOD KAMLESH JAYANTBHAI) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;dlnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 28 / 10/2025 *Mishra आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू The Appellant- Shri Rama Kant Saboo, Jaipur 1. 2. izR;FkhZ@ The Respondent- The ACIT, Circle-7, Jaipur 3. vk;djvk;qDr@ Theld CIT 4. विभागीय प्रतिनिधि] आयकरअपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZQkbZy@ Guard File ( By order,
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