Skip to main content

Exchange fluctuation loss while repaying loan is a revenue expenditure

Citation : Wipro Finance Ltd. vs Commissioner Of Income Tax, Civil Appeal No. 6677 Of 2008

Date of Judgment/Order : April 12, 2022

Court/Tribunal : The Supreme Court Of India

Corum : A.M. Khanwilkar; J., Abhay S. Oka; J., C.T. Ravikumar; J.

Background

The appellant company submitted returns of income on for the assessment year 1997-1998 , mentioning loss of income, amongst others, owing to exchange fluctuation of Rs.1,10,53,909/-. After processing the return under Section 143(1)(a) of the Income Tax Act, 1961, the assessment was completed on 16.3.2000. As against the loss declared by the appellant due to exchange fluctuation, the assessment was concluded by positive taxable income. Against that decision, the matter was carried in appeal by the appellant before the Commissioner of Income Tax (Appeals) and eventually, by way of appeal before the Income Tax Appellate Tribunal.

The ITAT decided in favour of the appellant but the decision was overturned by the High Court and the matter came to the Supreme Court.

Judgment

The Supreme Court agreed with ITAT. The Tribunal had referring to judgements in India Cements Ltd. vs. Commissioner of Income Tax Madras AIR 1966 SC 1053 , Empire Jute Co. Ltd. vs. Commissioner of Income Tax (1980) 4 SCC 25  & National Thermal Power Co. Ltd. vs. Commissioner of Income Tax had observed that :-
  1. The funds borrowed were utilised for the purposes of regular finance business carried on by the assessee. Such an income has also been offered for taxation and accepted by the department. Quantification of exchange fluctuation loss has been done as per rule 115 of the I T Rules. Said rule must be applied in computing the total income of the assessee had held by the Supreme Court in CIT vs. Chowgule Co Ltd.
  2. Further the exchange fluctuation loss is an expenditure incidental to carrying on of business and comes within the purview of section 37 of the Act as the same is incurred wholly and exclusively for the purposes of business. It is nobody’s case that the funds borrowed in foreign exchange have been diverted for non-business purposes.
  3. In this case entire borrowal of loan and the utilisation of the same, is in trading operations of the company more profitably and the fixed capital in this case is untouched. Hence the expenditure is on revenue account and allowable.

Comments

Post a Comment

Most viewed this month

Partition proceedings are vitiated even if single co-sharer is not made party or is not served in accordance with law

Cause Title :  Bhagwant Singh vs  Financial Commissioner (Appeals) Punjab, Chandigarh,  CWP-2132-2018 (O&M), High Court Of Punjab & Haryana At Chandigarh Date of Judgment/Order : 31.08.2022 Corum : Hon’ble Mr. Justice Sudhir Mittal Background A large parcel of land was owned by the Nagar Panchayat. Thereafter, some of the co-sharers sold their shares to third parties including the petitioners herein. On 22.11.1995, respondents No.3 to 5 filed an application for partition of the land. The petitioners were not impleaded as parties.  On completion of proceedings, sanad was issued on 28.08.1996. Vide two separate sale deeds dated 28.05.2008 respondents No.3 and 5 sold some portion in favour of respondent No.6 and 7. These respondents sought implementation of the sanad resulting in issuance of warrants of possession dated 05.06.2008. Allegedly, it was then that the petitioners realized that joint land had been partitioned and that proceedings h...
Post a Comment
Read more

Power of Attorney holder can also file cheque bounce cases: Supreme Court

The Supreme Court has held that a criminal complaint in a cheque bounce case can be filed and pursued by a person who holds a power of attorney (PoA) on behalf of the complainant. A three-judge bench headed by Chief Justice P Sathasivam gave the "authoritative" pronouncement on the issue, referred to it by a division bench in view of conflicting judgements of some high courts and the apex court. "We are of the view that the power of attorney holder may be allowed to file, appear and depose for the purpose of issue of process for the offence punishable under Section 138 of the Negotiable Instruments Act (which deals with cheque bounce cases)," the bench, also comprising justices Ranjana Prakash Desai and Ranjan Gogoi, said. The bench, in its judgement, said, "...we clarify the position and answer the questions in the following manner: "Filing of complaint petition under Section 138 of Negotiable Instruments Act through PoA holder is perfectly legal...
1 comment
Read more

Christian who reconverts as Hindu SC will get quota benefits

Amid the controversy over “ghar wapsi”, the Supreme Court on Thursday ruled that a person who “reconverts” from Christianity to Hinduism shall be entitled to reservation benefits if his forefathers belonged to a Scheduled Caste and the community accepts him after “reconversion”. Citing articles by B R Ambedkar and James Massey, and reports by Mandal Commission and Chinappa Commission, the court said: “There has been detailed study to indicate the Scheduled Caste persons belonging to Hindu religion, who had embraced Christianity with some kind of hope or aspiration, have remained socially, educationally and economically backward.” The bench of Justices Dipak Misra and V Gopala Gowda held that a person shall not be deprived of reservation benefits if he decides to “reconvert” to Hinduism and adopts the caste that his forefathers originally belonged to just because he was born to Christian parents or has a Christian spouse. Expanding the scope of a previous Constitution benc...
1 comment
Read more