Anurag Chandra Vs National Faceless Appeal Centre (ITAT Mumbai)
Introduction: In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Mumbai delivered a verdict in favor of Anurag Chandra against the National Faceless Appeal Centre, validating the method of declaring actual profit in Indian currency after determining the foreign profit by calculating all transactions in foreign currency. This decision underscores the importance of accurate and standardized accounting practices for income earned abroad and its conversion into Indian Rupees (INR).
Case Background: Anurag Chandra, the appellant, filed his return of income for the Assessment Year (AY) 2016-17, declaring an income of ₹40,78,600. During the assessment, discrepancies were observed by the Assessing Officer (AO) regarding the closing and opening stock values. Consequently, an addition of ₹1,00,63,228 was made to the returned income, resulting in a significant tax burden on Chandra.
Chandra’s defense was grounded on the application of Rule 115 of the Income Tax Rules, 1962, which stipulates that income accrued in foreign currency must be converted to INR using the telegraphic transfer buying rate (TT Buying rate) on the specified date. According to Chandra, the proper application of this rule meant that the foreign profits and losses should be converted at the end-of-year exchange rates, negating the relevance of opening stock discrepancies.
