2024 (4) TMI 317

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....in instituting this appeal, and with the consent of the learned counsel for the parties, we have taken up this appeal for consideration. 4. Ms Linhares submits that this appeal raises the following substantial questions of law: (a) Whether on the fact and in the circumstances of the case, the Hon'ble ITAT erred in deleting the addition of Rs. 8,65,74,413/- made on account of disallowance of foreign exchange fluctuation loss on sale proceeds held in the EEFC account as the sale proceeds which were already received by the assessee and the assessee was not under obligation to keep sale proceeds under EEFC account? (b) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is perverse in holding tha....

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....decision of the Hon'ble Supreme Court in the case of Woodward Governor India (P) Ltd. (supra) affords the complete answer to the contentions now raised on behalf of the Revenue by Ms Linhares. 9. In Woodward Governor India (P) Ltd. (supra), the Hon'ble Supreme Court made the following observations at Paras 14 and 18 : 14..... That is why in deciding the question as to whether the word "expenditure" in Section 37(1) includes the word "loss" one has to read Section 37(1) with Section 28, Section 29 and Section 145(1). One more principle needs to be kept in mind. Accounts regularly maintained in the course of business are to be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable. One ....

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....ning unsold at the end of the accounting year and carried over to the following years account in a continuing business are not brought to the charge as a matter of practice, though, as stated above, loss due to fall in the price below cost is allowed even though such loss has not been realized actually. At this stage, we need to emphasise once again that the above system of commercial accounting can be superseded or modified by legislative enactment......... 18........In case of revenue items falling under Section 37(1), para 9 of AS-II which deals with recognition of exchange differences, needs to be considered. Under that Para, exchange differences arising on foreign currency transactions have to be recognized as income or as expense in....