I, an Indian Proprietor import goods from China. Now I purchased goods on 1st February 2012 of $10000 on 3 months credit. The same will be paid on 1st May 2012. Value of Dollar as on 1st Feb 2012 was say Rs.50 and as on 1st May 2012 it was Rs.56. On 31st March 2012 it was say Rs.55.
Now what shall be the accounting treatment. Also, more importantly, can the Foreign Exchange Fluctuation Loss be claimed in Income Tax Act? If yes, under which section?
06 July 2012
As per AS-11 Accounting for Foreign Fluctuations. Accounting Treatment as follows:- on 1st Feb, Import Purchase Dr 5L To Party 5L on 31st Mar, Exchange Loss Dr 50000 To Party 50000 on 1st May, Exchange Loss Dr 10000 To Party 10000
Party Dr 560000 To Bank 560000
P&L A/c Dr 60000 To Exchange Loss 60000
Yes, it will be allowed as per income Tax Act. However disclosure should be made in director's report for the Foreign Exchange outgo in u/s 217(I)(e)as per the companies Act,1956.If you are satisfied Please revert back.
Querist :
Anonymous
Querist :
Anonymous
(Querist)
06 July 2012
Thanks! This is actually a Proprietor(but is liable to Tax & VAT Audit). So do any disclosures have to be made in Tax Audit Report!
And under which section is this allowed in the Income Tax Act? And what if there is a gain instead of loss? Does it have to offered to tax as income?
07 July 2012
No disclosure has to be made in Form 3CD.However you can show in Notes to Account.Exchange Loss is allowed u/s 37(1) of the Income Tax Act. Exchange gain is credited to Profit & Loss Account as Income.
CAclubindia
