Law: Income Tax Act, 1922

Section:

Income-tax----Capital or revenue expenditure---Loan obtained for financing import of machinery from abroad---Higher amount of instalments paid than amount of instalments agreed upon at time of borrowal of loan due to exchange fluctuations---Is capital expenditure. The higher amount of instalments paid due to exchange fluctuations than the amount of instalments agreed upon at time of borrowal of the loan taken for financing the import of machinery from abroad is capital expenditure. JUDGMENT K.A. THANIKKACHALAM, .J.---At the instance of the assessee, the Tribunal referred the following question, for the opinion of this Court, under section 256(1) of the Income Tax Act, 1961, for the assessment years 1975-76 and 1976-77: . "Whether, on the facts and in the case circumstances of the case and having. regard to the provisions of section 43-A, the Tribunal was right in holding that the sum of Rs.93,223 and Rs.1,13,085 for the assessment years 1975-76 and 1976-77, respectively, being the excess of the instalments paid on account of fluctuation in exchange rates, was not allowable as a revenue expenditure?" The assessee is a public limited industrial company. It had borrowed a loan for financing the import of machinery from West…

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