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Judgment
BY THE COURT:
For the asst. yr. 1975-76 and 1976-77, the assessee has claimed deduction of additional amounts of Rs. 2,42, 093 and Rs. 3,29,849 respectively paid by it as a result of foreign exchange rate fluctuation as deduction under S. 37 as the expenses having been laid or incurred wholly for the purposes of carrying on the business, for the asst. yrs. 1975-76 and 1976-77. This claim of the assessee was ultimately refused by the Tribunal by holding the loss to be of capital nature. At the instance of assessee, following two questions have been referred to this Court for its opinion arising out of Tribunal''s appellate orders in ITA Nos. 1441 and 1442/Ahd/1981 relating to the two assessment years in question:
Whether on the facts and circumstances of the case, the Tribunal was justified in holding that the assessee was not entitled to claim a sum of Rs. 2,42,093 for asst. yr. 1975-76 and Rs. 3,29,849 for asst. yr. 1976-77 being the amount payable on account of foreign exchange fluctuation as deduction under s. 37 of the IT Act, 1961 and/or s. 28(1) of the Act?
Whether, on the facts and circumstances of the case, the Tribunal was justified in following the decision rendered by the Special Bench in the case of Poysha Industrial Co. vs. ITO (1981) 7 Tax 181 ?"
It was pointed out by both the learned counsel that the issue has been settled by decision of the Supreme Court in Sutlej Cotton Mills Limited Vs. Commissioner of Income Tax, Calcutta, as followed by this Court in Commissioner of Income Tax Vs. Windsor Foods Ltd., that the loss arising out of foreign exchange rate fluctuation requiring payment of additional sum is not loss or expenditure of revenue nature but of capital nature and is not allowable as a deduction.
As a result we answer question No. 1 referred to us following the aforesaid decision in affirmative, that is to say, in favour of Revenue and against the assessee.
In view of our answer to question No. 1. question No. 2 had become of academic importance and we decline to answer.