Case Law Details
India Safari And Tours Ltd Vs DCIT (ITAT Delhi)
Apropos issue relating to disallowance of gross income on foreign exchange. On this issue, AO noted that assessee was found to have claimed certain loss on account of foreign exchange fluctuation on revaluation of advances received. He noted that loss was in respect of advances and not in respect of any revenue or expenditure, hence not allowable. The assessee informed that this was on account of revaluation under the head advance from customer. AO held that the amount of fluctuation on account of revaluation of advances is not revenue expenditure. Ld. CIT (A) confirmed the same.
It has been submitted that assessee is a company bound to follow Accounting Standards issued by the ICAI. It has been submitted that as per the Accounting Standard 11 issued by the ICAI, exchange differences arising on foreign currency transactions have to be recognized as income or as expense in the period in which they arise. Assessee has further placed reliance on the judgment of Hon’ble Apex Court in the case of CIT vs. Woodward Governor India Pvt. Ltd. 312 ITR 254. Further it has been submitted that the assessee has been consistently following this practice.
Upon careful consideration, ITAT find that the claim of the assessee has to be examined on the touchstone of Hon’ble Supreme Court decision in Woodward Governor India Pvt. Ltd. (supra). Hon’ble Apex Court has affirmed the allowability as revenue expenditure of the foreign exchange fluctuation determined on the basis of Accounting Standard-11 consistently on mercantile basis. Here, no case has been made out that the claim of assessee is not in consonance of this exposition. Hence, respectfully following the precedent, the assessee’s ground is allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
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