Forex loss can be capitalised as per Sec. 43A even if Indian currency loan is subsequently converted into forex loan

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Forex loss can be capitalized as per Sec. 43A even if Indian currency loan is subsequently converted into Forex loan

Continuum Wind Energy (India) (P.) Ltd

[2020] 122 taxmann.com 118 (Madras)

 

Short overview of the case: 

 

Section 43A, read with section 32, of the Income-tax Act, 1961

 

Foreign currency, rate of exchange, change in (Depreciation)

 

Assessment year 2013-14

 

Issue was as to whether where assessee converted Indian currency loan availed for acquisition of fixed assets, namely, plant and machinery, into foreign currency loan for saving interest, loss incurred due to foreign exchange fluctuation on such foreign loan was to be adjusted against cost of concerned capital assets in terms of section 43A and depreciation was to be allowed on such adjusted value of capital assets?

 

Court held it as yes & the issue was decided in favor of assessee.

 

The court has concluded as under :

 

Where assessee converted Indian currency loan availed for acquisition of fixed assets, namely, plant and machinery, into foreign currency loan for saving interest, loss incurred due to foreign exchange fluctuation on such foreign loan was to be adjusted against cost of concerned capital assets in terms of section 43A and depreciation was to be allowed on such adjusted value of capital assets

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