Rate of Exchange - Section 67A

[Sanjeev Sharma]

A Company has entered into an agreement  with a foreign company on 25th June 2012 to provide certain services, for which monthly invoice will be raised (IN USD) on first day of following month. This agreement is for calender year 2012.

 

As per Section 67A, rate of exchange will be the rate in force at the time of service provided or agreed to be provided.

So in the above case whether rate of exchange of 25th June 2012( date of agreement) will be used for whole of the service period or the rate on the date of invoice will be exchange rate.

[Surender Gupta]

Since the agreement in question is for continuous services and for which monthly Invoice is required to be issued, the rate of foreign exchange would be as applicable on the date of Invoice. However, in case advance is received, than rate of exchange is as applicable on the date of receipt of advance.

Here, the term agreed to the provided is not to be taken as date of agreement for future services for neither invoice has been raised nor any payment has been received.

In my view Provisions of section 67A are required to be read with POT rules, 2011 as amended.

AI Summary

Rate of exchange: invoice date governs conversion for continuous foreign currency services; advances use date of receipt. For continuous services invoiced monthly in foreign currency, the applicable rate of exchange is the rate on the date of the invoice; if an advance is received, the rate on the date of receipt of the advance applies. The term 'agreed to be provided' does not equate to the date of a standing agreement when no invoice or payment has occurred, and Section 67A must be read with the Point of Taxation Rules, 2011.