1. On 26-11-2008, we had passed the following order:

2. The Assessee had taken a term loan for his project for manufacturing toners and developers. The total interest liability in respect of the borrowings from banks and financial institution was Rs. 13,82,29,841 for the assessment year 1998-99 and Rs. 3,02,58,926 for the assessment year 1999-2000. In the year in question, i.e, the assessment year 2001-02, the Assessee resorted to external commercial borrowing from State Bank of India, Frankfurt, Germany to the extent of US$ 21,35,400. The purpose of resorting to the external commercial borrowing was to reduce the interest liability of the Assessee. The interest rate in respect of the term loan was in the region of 20 per cent, to 26 per cent, whereas the interest rate in respect of the external commercial borrowing was only 8.1 per cent. As a result of resorting to the external commercial borrowing, the interest liability of the Assessee fell sharply in the year under appeal to Rs. 1,26,73,538. However, since there was an exchange rate fluctuation in the year in question, the Assessee debited a sum of Rs. 64,06,200 on account of increase in the liability on the external commercial borrowing at the end of the accounting year. The issue that has been sought to be raised in the present appeal is the treatment to be given to this increase in liability. According to the Appellant/Revenue, it should be treated in the capital account whereas on behalf of the Assessee/Respondent it is contended that it falls within the revenue account. It was specifically pointed out before the Tribunal by the Assessee as noted at page 90 of the paper book that whenever there were gains on account of foreign exchange fluctuation they were assessed as business income. It was also submitted that such gains were assessed as business income in the assessment years 2003-04 and 2004-05. If this be the case then the Assessee would be entitled to treat the said increased liability on account of foreign exchange fluctuation in the revenue account. The learned Counsel for the Appellant/Revenue seeks time to verify the aforesaid statement. Renotify on 5-12-2008.

3. The learned Counsel for the Appellant/Revenue has verified the statements made by the learned Counsel for the Respondent and she submits that it is true that the gains were assessed as business income in the assessment years 2003-04 and 2004-05. Consequently, the Assessee would be entitled to treat the said increased liability on account of foreign exchange fluctuation as on revenue account. This is precisely what has been decided by the Income Tax Appellate Tribunal in the impugned order. The appeal is liable to be dismissed. It is ordered accordingly.