TaxTMI 
TaxTMI 
2010 (3) TMI 81
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....sues are no more res integra, we deem it unnecessary to state the facts in detail and with a view to appreciate the controversy, a brief reference to the foundational facts in respect of assessment year 1991-92 would suffice. These are: The appellant, hereinbefore referred to as "the Assessee", is a public sector undertaking, substantially owned by the Government of India. It is engaged in capital intensive exploration and production of petroleum products for which it has to heavily depend on foreign loans to cover its expenses, both capital and revenue, on import of machinery on capital account and for payment to non-resident contractors in foreign currency for various services rendered. The Assessee had made three types of foreign exchange borrowings: (i) in revenue account; (ii) in capital account and (iii) for general purposes, partly utilised in revenue account and partly in capital account. As per terms and conditions of foreign exchange borrowings, some of the loans became re-payable in the year under consideration but date of repayment of some loans fell after the end of the relevant accounting year. The Assessee revalued in Indian currency all its foreign exchange loans i....
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....elevant assessment year. However, as regards the adjustment for increased liability made by the Assessee for the purposes of Section 43A of the Act in respect of foreign exchange loans in capital account, which were outstanding as on 31st March, 1991, the Commissioner accepted the stand of the Assessee and directed the Assessing Officer to allow the benefit of such increased liability for computation of depreciation allowance on plant and machinery purchased out of such foreign exchange loans for the assessment year under consideration. 4. Being dissatisfied, both the Assessee as well as the Revenue carried the matter in further appeals to the Income Tax Appellate Tribunal (for short "the Tribunal"). The Tribunal observed that the method of accounting adopted by the Assessee right from the assessment year 1982-83 is mercantile system; it has been consistently claiming loss suffered by it on account of fluctuation in foreign exchange rates on accrual basis; in respect of assessment years 1982-83 to 1986-87, the Assessee's claim on this account had been allowed by the Assessing Officer himself; in respect of assessment year 1997-98, the Assessee had shown a gain of Rs.293.37 crores ....
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....ons of this Court in Oil & Natural Gas Commission & Anr. Vs. Collector of Central Excise [1992] Supp 2 SCC 432 and Mahanagar Telephone Nigam Ltd. Vs. Chairman, Central Board, Direct Taxes [2004] 267 ITR 647 (SC), the High Court should not have entertained the appeals preferred by the Revenue. 7 .Mr. B. Bhattacharya, learned Additional Solicitor General, appearing on behalf of the Revenue, on the other hand, while candidly admitting that both the issues raised in the present appeals, have been decided by this Court in Woodward's case [2009] 312 ITR 254, submitted that in view of the finding by the High Court that no agreement between the Assessee and the foreign creditors had been placed on record, the High Court was correct in law in allowing Revenue's appeals. 8. At the outset, we may note that although in view of the orders passed by the Committee on disputes, advising the Revenue not to file appeals against Tribunal's orders, we find some substance in the objection of learned counsel for the Assessee about the maintainability of Revenue's appeals before the High Court but as we have heard learned counsel for the parties on merits of the appeals, at this stage, we do not propos....
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....ent to losses claimed to have accrued and to the gains that may accrue to it; (iv) whether the assessee has been consistent and definite in making entries in the account books in respect of losses and gains; (v) whether the method adopted by the assessee for making entries in the books both in respect of losses and gains is as per nationally accepted accounting standards; (vi) whether the system adopted by the assessee is fair and reasonable or is adopted only with a view to reducing the incidence of taxation. Applying these factors on the facts of that case, it was held that the "loss" suffered by the Assessee, maintaining accounts regularly on mercantile system and following accounting standards prescribed by the Institute of Chartered Accountants of India (ICAI), on account of fluctuation in the rate of foreign exchange as on the date of balance-sheet was an item of expenditure under Section 37(1) of the Act, notwithstanding that the liability had not been discharged in the year in which the fluctuation in the rate of foreign exchange occurred. 11. We are of the opinion that the ratio of the said decision, with which we are in respectful agreement, squarely applies to the f....