ARCHIDPLY INDUSTRIE LTD ,BANGALORE vs. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1(1)(1), BANGALORE

In this regard the CIT (A) in paras 5 and 6 of his order had held as under : 5. In the matter of hedging charges of Rs.15,41,533/- disallowed by the AO, the appellant has submitted that the ITAT had dismissed our appeal against the order of CIT (A) and AO for AY 2008-09. Presently the matter on this issue is pending before the H'ble High Court of Karnataka. 6. It is seen that the AO in his assessment order has stated that the loss on account of restatement of loan on the last day of the previous year is not fan allowable expenditure as it is capital in nature. The loss claimed by the assessee is not the actual exchange fluctuation loss, but a premium paid on forward contract to secure against adverse fluctuation of foreign exchange. In the case of the appellant admittedly the foreign exchange loan was in connection with conversion of a rupee term loan into a foreign currency loan and the purpose of the loan was for purchase of machinery which is on capital account. In view of the above, the disallowance made by the AO is upheld.

The Ld. AR has submitted that though the issue has been decided by the Tribunal for AY 2008-09 on which reliance was placed by the CIT(A), however the matter is subject to adjudication before the Hon’ble High Court and the result is awaited. 04. On the other hand the Ld. DR brought to our notice para 14 of the decision of the coordinate bench in the case of the assessee for AY 2008-09, vide ITA.1079/Bang/2011, dt.31.07.2012, which reads as under: 14. The decision of the Hon’ble Supreme Court in the case of Woodward Governor India P. Ltd (supra) would apply only in respect of exchange fluctuation on loans taken for revenue purposes. In the case of the Assessee admittedly the foreign exchange loan was in connection with conversion of a rupee term loan into a foreign currency loan. The purpose of the loan was for purchase of machinery which is on capital account. Therefore, the sum in question cannot be claimed as deduction. The other decisions relied upon by the learned counsel for the assessee are on the loss on account of fluctuation of foreign exchange relatable to revenue account and have nothing to o with the claim of the assessee as made in the present case. The sum in question cannot also be capitalised to the value of the machinery for the reason that the machinery has already been put to use.

We have heard the rival contentions and perused the material. In our view the issue is covered against the assessee by the decision of the coordinate bench for AY 2008-09 (supra). Therefore following ITA.1151/Bang/2017 Page - 4 the decision of the coordinate bench in the case of the assessee, we do not find any merit in the appeal of the assessee. Accordingly the same is dismissed. Needless to say as and when the Hon’ble High Court passes an order, the same shall be given effect to in accordance with law.

In the result, appeal of the assessee is dismissed Order pronounced in the open court on 31 January, 2018. Sd/- Sd/- (JASON P. BOAZ) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER MCN* Copy to: 1. The assessee 2. The Assessing Officer 3. The Commissioner of Income-tax 4. Commissioner of Income-tax(A) 5. DR 6. GF, ITAT, Bangalore By order