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2008 (10) TMI 241 - KARNATAKA HIGH COURTBusiness loss – Business expenditure - The respondent (assessee) filed return for the assessment year 1996-97 disclosing the loss of Rs. 1,37,57,730 in respect of unpaid bills on account of fluctuation in the foreign exchange rate (FER) and disclosed the gain of Rs. 1,08,13,049 towards unpaid bills on account of fluctuation in the foreign exchange rate. - The assessee had set off the gain as against the loss in the transaction and disclosed the loss at the rate of Rs. 69,25,345 in one transaction and Rs.29,44,681 in respect of other transaction. - The Assessing Officer accepted the return of the assessee. The Commissioner of Income-tax in a suo moth revision has found that the loss disclosed is in respect of incomplete transaction. The assessee had not paid the outstanding bills and not entitled to deduction towards loss on account of fluctuation in FER. – Held that the assessee according to rule 115 of the Income-tax Rules, had disclosed notional loss and gain on account of foreign exchange rate fluctuation as on March 31, 1996, which is perfectly is in accordance with law. – Further, it is held that the income-tax law did not permit deduction towards the maintenance of guest house expenditure for the assessment year in question.
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