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"7. Ground No.3 pertains to consideration of foreign exchange fluctuation gain of Rs.24,01,43,981/-. Details are as under:

1. Forward contract in respect of loan/ Investment : (21,41,824) in Caraco Pharmaceutical Laboratories Ltd.
2. Reinstatement of FCCB : 27,66,11,029
3. Reinstatement of FCCB proceeds : 28.66,118
4. Reinstatement of loan to other subsidiaries out : (3,71,91,342) of FCCB Proceeds -----------------
58. Insofar as the loans received by way of ECG/FCCB, the ld. CIT(A) was of the opinion that these borrowings were for the purpose of capital expansion of the business since the proceeds can be used for capital purposes only. Therefore, there is no case for any addition on account of forex gain in respect of reinstatement of FCCB and conversion of FCCB into equity shares as well as repayment of ECB since these gains/receipts are held as capital receipt only. The ld. CIT(A) confirmed the addition of Rs. 14,33,80,289/- being forex gain in respect of rolling over of forward contract for safeguarding investment in Caraco and OFCD in Global.
(ii) Reinstatement of FCCB and Exchange gain on 29,62,23,740/-
conversion of FCCB into equity shares
(iii) Repayment of ECB 13,78,089/-
The other particulars relating to foreign exchange loss are on account of reinstatement of bank balance/bank deposit out of FCCB proceeds and reinstatement of loan given to subsidiaries out of FCCB proceeds/reinstatement of investment in mutual funds out of FCCB proceeds. The appellant has treated the forex loss in respect of the above also as capital loss. Thus, the net forex gain treated as Capital receipt is reported at Rs. 31,03,51,524/-.