Case Law Details
Pr. CIT Vs HCLl Comnet Systems & Services Ltd (Delhi High Court)
What is important is that in the AY 2009-2010, on account of fluctuation in the currency, the gain, which accrued to the assessee, was, concededly, offered to tax. As a matter of fact, the judgment of the Karnataka High Court relied upon by Mr. Singh uses this indicia almost as a litmus test to ascertain as to whether conditions stipulated in Woodward Governor India P. Ltd. (supra) stand fulfilled. For the sake of convenience, the relevant observations made by the Karnataka High Court in Wipro Finance Ltd. (supra) are extracted hereafter:
The view taken by the Supreme Court in this judgment is to the effect that while even a notional loss can be claimed by way of a business loss and as a deductible item in computing the income of the assessee for the year, as it is a computation on notional basis, it is made dependent on the manner of conduct of the assessee in respect of the earlier assessment period and particularly as to the assessee has been following this uniformly over a period of years and the test being when there was a notional gain as to whether it had been offered for tax etc. The Supreme Court took the view that such claim can be entertained subject to fulfillment of the following six conditions:
(i) whether the system of accounting followed by the assessee is the mercantile system, which brings into debit the expenditure amount for which a legal liability has been incurred before it is actually disbursed and brings into credit what is due, immediately it becomes due and before it is actually received;
(ii) whether the same system is followed by the assessee from the very beginning and if there was a change in the system, whether the change was bona fide;
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