The Tax Publishers2019 TaxPub(DT) 7538 (Bom-HC)

INCOME TAX ACT, 1961

Section 115JB

Since forward foreign exchange contract entered into by assessee to buy or sell foreign currency at an agreed price at future date could not be considered as a contingent in nature as it creates a continuing binding obligation on the date of the contract against the assessee, therefore, it could not be said that amount was in a nature of contingent liability.

MAT - Book profit under section 115JB - Amortized amount of exchange difference arising out of foreign currency borrowings - Computation of

Assessee was engaged in business of five-star deluxe hotels. AO made an addition to the book profit on account of foreign currency transaction difference and treated it as contingent in nature. AO passed an order under section 154 computing the total income. CIT(A) and Tribunal partly allowed the appeal of assessee deleting the addition on the ground that the liability was not a contingent liability. Held: Tribunal and CIT(A) held that forward foreign exchange contract entered into by assessee to buy or sell foreign currency at an agreed price at future date cannot be considered as a contingent in nature as it creates a continuing binding obligation on the date of the contract against the assessee. Therefore, there was no error in the view taken by Tribunal that where an obligation was undertaken to meet a liability and only consequential effect was to be determined, it could not be said that the amount in question was in a nature of contingent liability. Thus, no substantial question of law arose.

REFERRED :

FAVOUR : In assessee's favour

A.Y. :



IN THE BOMBAY HIGH COURT

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