Notional Foreign Exchange Gain from year-end revaluation of a loan on capital account was not taxable income

DCIT Vs Sahajanand Medical Technologies Limited (ITAT Surat)

Conclusion: Tax treatment of a foreign exchange fluctuation depended entirely on the nature of the underlying asset or liability. Gains or losses on capital items (like a long-term investment or loan) were not typically recognized for tax purposes until the asset was actually sold or the loan was repaid. If a gain was capital in nature under the core provisions of the Act, an ICDS could not by itself convert it into a taxable revenue receipt.

Held:  Assessee-company, which was no

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