Content Provider | Supreme Court of India |
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e-ISSN | 30484839 |
Language | English |
Access Restriction | NDLI |
Subject Keyword | Income Tax Act |
Content Type | Text |
Resource Type | Law Judgement |
Jurisdiction | India |
Case Type | Appeal |
Court | Supreme Court of India |
Disposal Nature | Appeal Dismissed |
Headnote | Income Tax Act, 1961:s. 37(1) - Loan for revenue purpose - Fluctuation in rate of exchange - Deduction of additional liability arising therein u/s 37(1) in year of fluctuation in rate of exchange or in year of repayment of such loan - Held: Loss on account of exchange difference as on date of balance sheet is item of ,,. expenditure u/s.37(1) and is deductible thereunder - Any difference, Joss or gain, arising on conversion of said liability at closing rate, should be recognized in profit and loss account for the reporting period. Accounting method followed by assessee continuously for a given period of time is presumed to be correct till Assessing Officer points out defects therein - No finding by AO on correctness of accounts of assessee and also on correctness of accounting standards followed by assessee - Thus, claim of assessee for deduction of unrealized loss due to foreign exchange fluctuation as on last date of previous year to be allowed. Accounting Standard-11 - Is giving of accounting treatment on the balance sheet date for the effects of changes in foreign exchange rates.s. 43A (unamended) - Liability on capital account. Fluctuation in rate of exchange - Adjustment at each balance sheet date pending actual payment of varied liability - Entitlement of- Held: s. 43A provides for adjustment in actual cost of assets pursuant to change in foreign currency exchange rates, actual payment not being a condition precedent- s. 43A corresponds to para 10 of AS-11- Thus, adjustment in actual cost of assets pursuant to foreign exchange fluctuation are to be made at each balance sheet date. s. 43A (amended) - Nature of - Held: Is amendatory and not clarificatory in nature - Under amended s. 43A adjustment in the actual cost is made on cash basis - Actual payment of decreased/enhanced liability is made a condition precedent for making adjustment in carrying amount of fixed asset. The question which arose for determination in these appeals is (i) whether the additional liability arising on account of fluctuation in the rate of exchange in respect of loans taken for revenue purposes could be allowed as deduction under section 37(1) of the Income Tax Act, 1961 in the year of fluctuation in the rate of exchange or whether the same could only be allowed in the year of repayment of such loans; and (ii) Whether the assessee is entitled to adjust the actual cost of imported assets acquired in foreign currency on account of fluctuation in the rate of exchange at each balance sheet date pending actual payment of the varied liability. |
Judge | Honble Mr. Justice S.H. Kapadia |
Neutral Citation | 2009 INSC 470 |
Petitioner | Commissioner Of Income Tax, Delhi |
Respondent | M/s Woodward Governor India P. Ltd. |
SCR | [2009] 5 S.C.R. 738 |
Judgement Date | 2009-04-08 |
Case Number | 2206 |
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