By TIOL News Service

MADRAS, NOVEMBER 19, 2018: THE ISSUE IS - Whether the loss arising from foreign exchange fluctuation is an unascertained liability required to be added back to the book profit as per clause (c) of explanation to Section 115JA. NO IS THE VERDICT.

Facts of the case

++ assessee's contention is that such loss arising from the foreign exchange fluctuation was determined with reference to rate of foreign exchange as on the last date of the financial year and was, therefore, an ascertained liability for the purpose of Clause (c) of Explanation to Section 115JA of the Act. The assessee further contended that for the import, the assessee had to effect payments on or before 31st March of the relevant year and the amount having not been paid, the rate of the foreign exchange as on 31st March was taken into account and accordingly, the same was calculated and therefore, it cannot be treated as an unascertained liability. Though the Revenue contended that the assessee has made only a provision, it was found that nowhere in the assessment proceedings such a statement was made. Even while passing the assessment order, the AO has shown the same as loss on account of exchange fluctuation and not as a provision. Therefore, the substantial question of law framed for consideration in the case on hand, requires to be answered in favour of the assessee.

(See 2018-TIOL-2440-HC-MAD-IT)