Assessee has taken a working capital ECB loan from its holding company. The loan was converted into equity shares based on the exchange rate of that day. The loss on account of difference in exchange rate was accounted as revenue loss. AO disallowed the loss and treated repayment of ECB loan and allotment of shares as one transaction. The Tribunal held that allotment of shares by a company in lieu of a genuine debt is in compliance of Section 75(1) of Companies Act, 1956. Conversion of dollar denominated ECB into rupee denominated share capital comprises of two distinct transactions and hence deleted the addition made by the AO. (AY. 2009-10)