In AS it is written that when assets is purchased from foreign at credit and when there is price increased due to exchange rate difference we have to charges it to P& L account at the end of the year. But in taxation instead of charging to P&L the assets cost is increased why it is so?????
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Foreign exchange Query
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Good Question !
After Amendment in AS-11 and Ssch VI , FOREX diff arising in liability towards purchase of Fixed assets is written off to P&L is mandatory.
But for Income tax all expenses incurred towards Purchase of Capital Asset ( inc Such FOREX Diff) is Capital Expenditure and therefore not allowed to be written off in P&L.Even if it charged it is Disallowed. Similar diff between Accounting and taxation exist is other areas ( e.g Treatment of Borrowing Cost, Leases etc
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