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Issues involved: The appeal raised substantial questions of law regarding the foreign exchange losses suffered by the assessee on the revenue account due to fluctuation in foreign exchange on the last date of the accounting year ending March 31, 2001.
a) Foreign exchange losses as contingent liability: The first issue was whether the foreign exchange losses, considered a contingent notional liability, were allowable as a deduction under the Income Tax Act. The contention was that these losses were suffered on the last date of the accounting year and should be deductible. b) Allowability of foreign exchange losses on revaluation: The second issue questioned whether foreign exchange losses arising from the revaluation of foreign exchange borrowings utilized on revenue account, where repayments occurred after the accounting year under consideration, were not allowable as deductions under the Income Tax Act. c) Method of accounting and accrual of liability: The third issue raised was whether the ITAT was justified in ignoring the method of accounting as per AS 11 for determining the allowability of deductions claimed. It was also debated whether the assessee needed to be obliged to discharge the liability for it to accrue. d) Treatment of foreign exchange fluctuation loss: The final issue concerned the justification of the ITAT in upholding the order of CIT(A) in allowing foreign exchange fluctuation loss. The debate was on whether the loss, resulting from the restatement of liabilities, was notional and did not qualify as an actual loss for deduction as expenditure. The judgment stated that all the issues raised were related to the foreign exchange loss suffered by the assessee on the revenue account due to fluctuation in foreign exchange on the last date of the accounting year. It was noted that the issues were covered by a previous Apex Court judgment, and as no substantial question of law arose in this appeal, it was dismissed in limine with no order as to costs.
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