Loss

The loan was taken in 1995. Its character was ascertained as a working capital in AY 1996–1997 by the AO himself. According to the assessee, it has become part of the circulating capital. Considering all these aspects and the principle of consistency, the loss suffered by the assessee on account of exchange rate fluctuation is allowable expenditure in this year also. The assessee may not be able to produce evidence of the utilisation of the capital before the AO but from the orders of the AO in earlier years and in subsequent years impliedly, it is ascertainable that it is used for the working capital which is in a revenue account and allowable.

Foreign Exchange Fluctuation — Loss arising out of foreign exchange fluctuation can be allowed based on past history of cases on principle of consistency even if there is no evidence to the effect that the borrowed forex loan was utilised for the purpose of business — as held by DelTrib in Perfetti India Ltd v ACIT –- In favour of: The Assessee ; ITA No. 4976/Del/2002 : Assessment Year: 1998-99

Decided on: 6 May 2011