Loss arising out of foreign currency term loan as a capital loss, Chennai bench of Income Tax Appellate Tribunal (ITAT) allowed depreciation on the cost of assets including forex.
The assessee claimed loss on foreign currency transactions to the extent of Rs.81,66,986/- and claimed the same as revenue expenditure like financial cost. The assessee challenged the order of CIT(A) confirming the action of AO in treating the loss arising out of foreign currency term loan as a capital loss as against claimed by the assessee as revenue.
The assessee alternatively claimed that if the loss was treated as a capital loss, then the same will increase the cost of the asset and the depreciation at the appropriate rate must be allowed to the assessee.
It was observed that the foreign currency term loan sanctioned by the bank was by way of conversion of existing rupee term loan and that the FCTL was at a concessional rate as compared to the rupee term loan leading to lower interest being debited in the profit & loss account.
Shri Mahavir Singh, vice president and Shri Manoj Kumar Aggarwal, AM observed that the loan taken for the purchase of machinery is rightly held by AO as a capital loss and allowed the alternative claimed by the assessee. The Tribunal directed the AO to allow depreciation at an appropriate rate. The appeal filed by the assessee was partly allowed.
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