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TMI Blog2024 (4) TMI 317X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue by the decisions of the Hon ble Supreme Court in the case of Commissioner of Income Tax, Delhi Vs Woodward Governor India (P) Ltd [ 2009 (4) TMI 4 - SUPREME COURT] wherein as clearly held that whether the loss suffered by the assessee due to fluctuation of foreign exchange as on the date of the balance sheet is in respect of the purchase and sale of goods (payments have to be made/received) is an item of expenditure u/s 37(1) of the Income Tax Act. Thus no substantial question of law arises in this appeal. - M. S. SONAK VALMIKI MENEZES, JJ For the Appellant : Ms Susan Linhares, Standing Counsel. For the Respondent : Mr Nishant Thakkar, Ms Linette Rodrigues and Ms Jasmin Amalsadvala, Advocates. P.C. 1. Heard Ms S. Linhares, learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent, submits that the issue raised in this appeal stands answered against the Revenue by the decisions of the Hon ble Supreme Court in the case of Commissioner of Income Tax, Delhi Vs Woodward Governor India (P) Ltd. (2009) 312 ITR 254 (SC) a nd of the coordinate Bench of this Court in the case of Commissioner of Income Tax-5 Mumbai Vs M/s. Vinergy International Pvt. Ltd. Income Tax Appeal No. 376 of 2014 decided on 11.08.2016. 7. Mr Thakkar submits that the Hon'ble Supreme Court, in the case of Woodward Governor India (P) Ltd. (supra), has clearly held that whether the loss suffered by the assessee due to fluctuation of foreign exchange as on the date of the balance sheet is in respect of the purchase and sale of goods (payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost or marker price, whichever is the lower. This is how business profits arising during the year needs to be computed. This is one more reason for reading Section 37(1) with Section 145. For valuing the closing stock at the end of a particular year, the value prevailing on the last date is relevant. This is because profits/loss is embedded in the closing stock. While anticipated loss is taken into account, anticipated profit in the shape of appreciated value of the closing stock is not brought into account, as no prudent trader would care to show increase profits before actual realization. This is the theory underlying the Rule that closing stock is to be valued at cost or marker price, whichever is the lower. As profits for income-tax pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e important point to be noted is that AS-11 stipulates effect of changes in exchange rate vis-a-vis monetary items denominated in a foreign currency to be taken into account for giving accounting treatment on the balance sheet dare. Therefore, an enterprise has to report the outstanding liability relating to import of raw materials using closing rate of exchange. Any difference, loss or gain, arising on conversion of the said liability at the closing rare, should be recognized in the P L account for the reporting period. 10. The ITAT has relied on Woodward Governor India (P) Ltd. (supra) in its impugned judgment and order dated 12.09.2022, which is now assailed in this appeal. Besides, in similar circumstances, and relying upon Woodward Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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