Income Tax deduction allowed by Karnataka High Court on loss suffered by assessee on Foreign Rate Fluctuation

Last updated: 18 November 2021

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The Karnataka High Court has ruled in favour of United Spirits Ltd., stating that losses incurred due to foreign exchange fluctuations on the balance sheet date are allowable as expenditure under Section 37(1) of the Income Tax Act. The court found the Assessing Officer's disallowance of the deduction, despite accepting the foreign exchange gain for tax, to be erroneous. This decision confirms that such losses can be claimed as an income tax deduction.

Court :
Karnataka High Court

Brief :
The Hon’ble Karnataka High Court in P.R Commissioner of Income Taxv. M/s United Spirits Ltd. [I.T.A. No. 548/2015 c/w I.T.A No. 37/2010 decided on September 2, 2021] answered in favor of the M/s United Spirits Ltd. ("the Assessee")and held that the loss suffered by an Assessee on account of foreign exchange difference as on the date of the balance sheet is an item of expenditure under Section 37(1) of the Income Tax Act ("IT Act") and further allowed the Income Tax deduction ("ITD") on the loss suffered by an Assessee on account of Foreign Exchange Fluctuation Loss ("FEFL").

Citation :
I.T.A. No. 548/2015 c/w I.T.A No. 37/2010 decided on September 2, 2021

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Judgement posted by

Bimal Jain

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FCA, FCS LLB with21 Yrs of Experience inTaxation Indirect and Direct: Education Qualification: B.Com (Hons) Chartered Accountants Company Secretary LLB Qualified SAP FI/CO Consultants Professional Membership: Chairmanof Indirect Tax Committee of PHD Chamber of Commerce Member of Indirec ... Read more

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