INCOME TAX ACT, 1961

--Appeal (tribunal)--Order of Tribunal Non-consideration of guidelines contained in a judgment of Supreme Court--In the relevant assessment year, assessee claimed foreign exchange loss as a business expenditure. Assessing officer was of the view that loss on reinstatement of foreign currency liability as on the last date of accounting year should not be allowed as deduction because the same had neither accrued for payment nor payment was made. Accordingly, he rejected the claim of assessee. On appeal, Commissioner (Appeals) upheld the order of assessing officer but tribunal reversed the same. Revenue callenged the order of tribunal on the ground that Tribunal had neither kept in mind nor had examiend the question of allowing the foreign exchange loss on the guidelines as indicated by the Supreme Court in judgment of CIT v. Woodward Governor India (P) Ltd. (2009) 312 ITR 254 (SC) : 2009 TaxPub(DT) 1628 (SC). Assessee contended that the Supreme Court having now concluded the matter to the effect that foreign exchange loss can be independently determined and debited to the profit and loss account, the disallowance by the AO was incorrect. Held: The fluctuation in exchange rate can result in loss or profit, namely, on the last day of the accounting year, the day on which the accounts are normally made up and should be factored into determination of loss or profit, etc. However, the Supreme Court has made it clear that the claim for foreign exchange loss to be allowed subject to verification and scrutiny by the AO, in the light of the guidelines referred to in the judgment in CIT v. Woodward Governor India P. Ltd. (2009) 312 ITR 254 (SC) : 2009 TaxPub(DT) 1628 (SC). The judgment of Supreme Court mentioned above ws not available when the AO, CIT(A) and Tribunal passed the order. But the judgment was now available and it is the duty of this court to apply the law now. Moreover, a factal error was found in assessment order, AO, in the body of assessment order had disallowed the entire amount claimed by assessee while in computation part, part of amount claimed was allwoed. But Tribunal had allowed the entire amount. Therefore, matter was remitted to AO to re-determine the income of the assessee by taking note of the claim of the assessee towards foreign exchange loss in the wake of the guidelines contained in the abovementioned judgment of the Supreme Court.

Income Tax Act, 1961 Section 254(1)

Income Tax Act, 1961 Section 37(1)

INCOME TAX ACT, 1961