@JUDGMENTTAG-ORDER
1. The revenue is aggrieved by an order dated 21-7-2006 passed by the Income Tax Appellate Tribunal (''the Tribunal'') Delhi Bench ''D'' in ITA No. 1320 (Delhi) of 2002 relevant for the assessment year 1998-99.
2. The assessee had taken a loan in foreign exchange from the Citi Bank, UK. The total amount borrowed was about US$ 7 million. It appears that a part of the loan amount was utilized for purchase of capital equipment and that was included in capital work-in-progress. The remaining amount of US$ 3.67 million was utilized by the assessee for its business purposes that is of money lending and bill discounting.
3. On 31-3-1998, the assessee showed utilization of the amount to the Reserve bank of India wherein it mentioned that the amount of US$ 3.67million has been utilized by the assessee for its business purposes.
4. In view of the fact that there was a fluctuation in the rate of foreign� exchange, the assessee suffered a loss and it claimed a deduction on account of the loss incurred.
5. The assessing officer as well as the Commissioner of income tax(Appeals) were of the view that since the amount had been borrowed by the assessee on capital account, the loss due to foreign exchange rate fluctuation could not be treated as a revenue loss.
6. Feeling aggrieved, the assessee preferred an appeal before the Tribunal which was accepted and that is why the revenue is before us.
7. Our attention has been drawn to a decision of the Bombay High Court in
8. The conclusion that we are really concerned with is conclusion No. 6, which reads as follows:
(vi) For determining whether devaluation loss is revenue loss or capital loss what is relevant is the utilization of the amount at the time of devaluation and not the object for which the loan had been obtained. Even if the foreign currency was intended or had originally been utilized for acquisition of fixed asset, if at the time of devaluation it had changed its character and had assumed the new character of stock-in-trade or circulating capital, the loss that occurred on account of devaluation shall be a revenue loss and not a capital loss.
9. The conclusion noted by the Bombay High Court and which has been accepted by this court is to the effect that the purpose of acquisition of the loan is of no consequence but what is of consequence is the utilization of the amount at the time when the devaluation took place. Insofar as the present case is concerned, the amount was utilized by the assessee for its business of money lending and bill discounting and this was also intimated by the assessee to the Reserve bank of India as on 31-3-1998. While it is true that the assessee may have originally taken a loan for the purposes of import of capital goods or setting up of a plant, at the time when the loan amount was utilized, it had undergone a change of character and had assumed a new character of stock-in-trade or circulating capital and, therefore, any loss suffered by the assessee on account of foreign exchange rate fluctuation would have to be treated as a revenue loss and not a capital loss.
10. In view of the facts of the case and the decision of this court in Woodward Governor (supra) we do not find any error in the decision that has been taken by the Tribunal.
No substantial question of law arises for consideration.
The appeal is dismissed.
