A division bench of the Hyderabad ITAT, in Ms. Mohini Alexander v. ACIT, held that forex loss, being ‘capital’ in nature cannot be set off against interest income or any other Income except long term capital gain under the provisions of the Income Tax Act, 1961.
Assessee, while filing her income tax returns, claimed loss of Rs.22,21,519 on account of foreign exchange fluctuation. She maintained that there is a loss which is directly connected with her FDs and interest income earned by her in the relevant year and therefore, the said loss can be set off against the income. The department rejected the claim and said that since the loss is in the nature of capital loss, it is not eligible for being set off against any income.
On first appeal, the Commissioner of Income Tax (Appeals) took a same stand.
Upholding the findings of the first appellate authority, the Tribunal noted that assessee cannot set off the forex loss from the interest income since, has arisen on account of the withdrawal of the fixed deposit during the assessment year 2014-15. Such loss cannot be set off against the interest income of the A.Y 2013-14.
The bench noted that in the present case, the interest income is chargeable under the head “income from other sources” whereas the loss is on account of forex fluctuation of fixed asset which is a capital loss. “There is no provision under which the capital loss can be set off against the interest income or from any other source except the long term capital gain. In view of the same, we are not inclined to interfere with the order of the CIT (A).”
Read the full text of the Order below.
