Please clarify on the following issue:
As held in Woodward Governer India Pvt Ltd case, "Loss on exchange fluctuation arising on mark to market losses in respect of loan taken for revenue purposes is allowable as a deduction" while computing Profits or Gains of Business or Profession.
Taking the same analogy from the above case law, the department will charge Gains on exchange fluctuation arising on mark to market in respect of loan taken for revenue purposes.
first of all i would like to know whether it is right to tax unrealised foreign exchange gain (as a result of applying AS-11) which is only booked?
secondly whether this can be extended to foreign debtors and creditors?
Thirdly i would also like to know whether the above issue amounts to taxing notional/unrealised gains which was not contemplated by the income tax act 1961?
i would like to know your views on these.
Padmaraj
CAclubindia
