INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Disallowance on account of fluctuation loss - Allowability -

AO disallowed expenses claimed by assessee under section 37(1) on account of fluctuation in the foreign currency in respect of outstanding balance of customers. AO noted that assessee did not explain the relevance of the expenditure with evidence and made addition of the same. CIT(A) also confirmed the above disallowance stating that assessee could not claim that the amount as Forex loss on revenue account without indulging in any transaction in the relevant year and without any revenue element to the transaction. Therefore, foreign exchange loss claimed by assessee was not allowable as a loss under section 37. Held: The issue was squarely covered by decision of Supreme Court in case of CIT v. Woodward Governer India P Ltd. (2009) 312 ITR 254 (SC) : 2009 TaxPub(DT) 1628 (SC). As before AO, no information was provided by assessee. Issue was set aside to the file of AO with a direction to assessee to show the amount of foreign exchange loss incurred by assessee in terms of Accounting Standard 11. AO was also directed to verify the detail and if the same was on account of the vendors, the claim of assessee was allowable. AO then after verification might allow the loss of foreign exchange fluctuation.

FollowedCIT v. Woodward Governer India P Ltd. (2009) 312 ITR 254 (SC) : 2009 TaxPub(DT) 1628 (SC)

REFERRED :

FAVOUR : Matter remanded.

A.Y. :

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