LOKSONS (P) LTD. Vs. ASSTT. CIT

JUDGEMENT

(1.) BY this reference, the Tribunal, Bombay has referred the following substantial question of law: Whether on the facts and circumstances of the case, the Tribunal was justified in upholding the disallowance of the claim of the assessee for deduction on account of exchange loss of Rs. 65,54,930 incurred on remittance of advance received for supply of goods holding that the sum was paid by the assessee was not on account of commercial expediency and was not incurred wholly and exclusively for the purpose of business?

(2.) THE above question of law pertains to assessment year 1989 -90. The brief facts are, that the assessee is a private limited company carrying on a business of trading and also export of goods and for the assessment year 1989 -90, the assessee had filed a return of income showing net loss of Rs. 56.03,630. However, the assessing officer had determined the net taxable income of the assessee at Rs. 8,06,729 and while passing the aforesaid assessment order dated 28 -2 -1992, the assessing officer had disallowed a sum of Rs. 65,54,930 being the amount of loss occurred due to fluctuation of foreign exchange rate while remitting back the advance received for supply of goods by the assessee.

(3.) ACCORDINGLY , after obtaining the said permission, the assessee had forwarded 32,09,895 UAE Dirhams to M/s Globe Trading Agency Ltd., Dubai during the assessment year 1989 -90. The value of UAE Dirhams had gone up substantially during the aforesaid lapse of 10 years since the amount was received in July/August, 1979 and it came to be refunded only in the asst. yr. 1989 -90. As a result of fluctuation in foreign exchange rates, to constitute the said 32,09,895 UAE Dirhams, the assessee had to pay in excess of Rs.65,54,930 during the assessment year 1989 -90 over and above the rate which was prevailing in July/August, 1979 when the amount was received by the assessee.