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Manual - ICDS VI : Effects of Changes in Foreign Exchange Rates
FCTR balance as on 1 April 2016 pertaining to exchange differences on monetary items for non-integral operations, shall be recognised in the previous year relevant for assessment year 2017-18 to the extent not recognised in the income computation in the past.
The correctness of the answer seems debatable as there is no real income that is really earned on the conversion. Further the treatment as prescribed in ICDS VI cannot apply to earlier years where the amount may not be taxable. Hence one will have to take appropriate professional judgment.
Taxability of foreign currency translation reserve: opening FCTR to be included in income unless previously recognised, requiring professional judgment. The opening balance of the Foreign Currency Translation Reserve (FCTR) as on 1 April 2016 relating to exchange differences on monetary items for non integral foreign operations shall be recognised in the relevant previous year as income to the extent not previously included in income computation; the correctness of this recognition is debatable and requires appropriate professional judgment because conversion does not create real income and ICDS treatment may not apply to earlier years.
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