sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Latest Expert Exchange
« General »
 Maximise tax savings using health insurance for yourself and family
 FinMin considers steps to prevent composition dealers from charging GST from buyers
 Do-it-yourself online filers may need to ask for some help this tax season
 Do we need composition scheme in GST for real estate?
 Here's how you can claim tax benefit on a top-up home loan
 Year-end tax tips to get you ahead of the season
 Manual filing allowed for tax cut at lower/nil rate
 Income tax return filing: I-T dept allows manual filing by resident, NRI taxpayers
 You don’t have to pay tax while gifting house to your child; here is how
 RBI-Special Deposit Scheme (SDS)-1975 Payment of interest for calendar year 2018
 How senior citizens can avail tax break on interest income under Sec 80TTB a

Foreign cos can claim tax deduction for forex losses: SC
September, 08th 2008

The Supreme Court has held that foreign companies can claim tax deductions for foreign exchange losses on account of currency fluctuations. A bench headed by Justice S H Kapadia while dismissing the Income tax department's petition held that the loss arising on account of "foreign currency translation" was allowable as deduction and the gains on the same account were also liable to be taxed in India.

The now bankrupt Enron Oil & Gas had along with Reliance Industries and state-run Oil and Natural Gas Corp (ONGC) had been awarded the Panna/Mukta and Tapti oil and gas fields off the Mumbai coast. Enron has since sold off its stake to BG Group of UK. According to the court, Enron, which was the operator of the field, made capital investments and proceeds from oil sales were used to recoup the operational costs and capital investment.
While stating that the oil used for this purpose was termed as "cost oil," Justice Kapadia said that often a company obtained profit not just from the "profit oil" but also from "cost oil."

"Such profits cannot be ascertained without taking into account translation (currency fluctuation) losses. Moreover, taxes are embedded in the profit oil. If these concepts are kept in mind then it cannot be said that translation losses under the production sharing contract are illusory losses," the judgement stated. The court also rejected the I-T department's argument that exchange losses on loans or other financing would not be admissible for deduction. "Cash call is not a loan. It is a contribution made into the account of the operator by each co-venturer in USD (dollars)," it added.

Enron and Reliance had 30 per cent stake each in the fields while the remaining 40 per cent was with ONGC.
Under Notification dated March 8, 1996, each co-venturer was liable to be assessed for his own share of income.
Enron had filed income tax returns for assessment year 1999-00 declaring its taxable income of more than Rs 71 crore under Section 115JA of the Income Tax Act. The assessing officer had disallowed the loss of more than Rs 38 crore on the ground that no loss was incurred by Enron and this was a mere book entry. However, Both CIT (A) and Income Tax Appellate Tribunal while allowing the loss of more than Rs 38 crore as deduction to the foreign company had held that just as foreign exchange gain was taxable so was loss allowable as deduction.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2019 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Enterprise Resource Planning Solutions ERP Solutions Enterprise Resource Planning Software Solutions ERP Software Solutions Supply Chain Management Solutions SCM Solutions Supply Chain Management Software Solutions SCM Software Solutions Enterprise Resource Planning Solutions India ERP Solutions India Enterprise Resource Planning Software Solutions India ERP Software Solutions India Supply Chain Management Solutions India SCM Solutions India Supply Chain Management Software Solutions India SCM Software Solutions India

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions