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IN THE INCOME TAX APPELLATE TRIBUNAL

‘A’ BENCH, BANGALORE

BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND

SHRI SOUNDARARAJAN K, JUDICIAL MEMBER

ITA No.837/Bang/2025

Assessment Year: 2013-14

Evry India Pvt. Ltd., Vs. The Dy./Asst. Commissioner of

5^th Floor, E Block, Global Village, Income Tax,

RVCE Post, Mysore Road, Circle – 2(2)(1),

Mylasandra, Bangalore.

Bangalore – 560 059.

PAN – AAJCS 8352 F

APPELLANT RESPONDENT

Assessee by : Shri Nitin Surana, AR

Revenue by : Shri N Balusamy, JCIT (DR)

Date of hearing : 11.12.2025

Date of Pronouncement : 31.12.2025

O R D E R

PER WASEEM AHMED, ACCOUNTANT MEMBER:

This is an appeal filed by the assessee against the order of the NFAC,

Delhi vide order dated 10/02/2025 in DIN No. ITBA/NFAC/S/250/2024-

25/1073076533(1) for the assessment year 2013-14.

2. The ground No. 1 of the assessee’s appeal is general in nature

and the same does not require any separate adjudication. Likewise, the

ground No. 3 of the assessee’s appeal pertains to levy of interest under

section 234C of the Act, which is consequential in nature and the same

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Page 2 of 11

does not require any separate adjudication. Hence, the Ground Nos. 1

and 3 of the assessee’s appeal are hereby dismissed as infructuous.

3. The issue raised by the assessee through Ground Nos. 2.1 to 2.6

of the appeal is that the learned CIT(A) and the AO erred in treating the

foreign exchange fluctuation loss of Rs. 91,54,500/- on restatement of

External Commercial borrowings as capital in nature.

4. The relevant facts are that the assessee company M/s Evry India

Pvt Ltd (formerly known as M/s SPAN Infotech (India) Pvt Ltd) is

engaged in the business of Software Development Agencies, IT Enabled

Services, BPO Services. During the year under consideration, the

assessee company has obtained loan from its parent company namely

“EDB Ergo Group” in the form of External Commercial Borrowing-ECB.

The impugned ECB was obtained for the purpose of setting up of SEZ

unit at Mohali Punjab. On restatement of ECB on the date of finalisation

of balance sheet, the foreign exchange fluctuation loss of Rs.

91,54,500/- arose which the assessee debited to the profit and loss

account. The assessee claimed that impugned exchange loss was

recognised in the books as per the requirement of accounting standard -

11 issued by the ICAI.

5. However, the AO held that the ECB was taken for capital asset

being setting up of SEZ Unit. Hence, the exchange fluctuation on the

ECB taken for setting up of SEZ unit is of capital nature which cannot be

allowed as revenue expenses deduction. The AO in this regard referred

the provision of section 37 of the Act.

.

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6. The AO further noted that the assessee in the tax audit report

under section 44AB of the Act for immediate subsequent year i.e. A.Y.

2014-15 has disallowed the foreign exchange fluctuation loss on ECB.

Accordingly, the AO held that the claim of the assessee that consistency

policy adopted is factually wrong. Further a loss or expenditure

disallowed in the subsequent and same loss or expenditure claimed as

deduction in the year doesn’t hold water. Accordingly, the AO disallowed

the deduction of Rs. 91,54,500/- claimed on account of exchange loss on

restatement of ECB and added the same to the total income.

7. The aggrieved assessee preferred an appeal before the learned

CIT (A).

8. The assessee before the learned CIT(A) submitted that the ECB

loan was taken in the earlier year and remained unused in that year. In

the year under consideration, the loan was used for both capital and

revenue purposes. A part of the loan was used for purchasing capital

assets. However, only a very small part of the capital expenditure related

to imported assets. Most of the capital assets were indigenous. A portion

of the loan was also used for revenue expenditure. Therefore, the

assumption that the entire ECB loan was connected with imported

capital assets is not correct.

8.1 Furthermore, the provision of section 43A of the Act applies only

when