27 June 2012
direct meterial purchased from outside India.Exchange loss or gain relating to those purchases directly reduced or added to purchases .Above treatment done by one company the treatment correct or not as per companies act?please tell me treatment of exchange loss or gain as per companies act? what affect of incometax?
27 June 2012
Prior to revised schedule VI, companies followed accounting policy to adjust purchase and sales with their respective exchange fluctuations on creditors and debtors. One of the objective was to get away from Tax authorities scanner. But not always, as the ITO normally asks for seperate statement for unrealised forex and then it depends upon him whetehr to allow or disallow. There are many cases on both allownace as well as disallownace on this subject.
However, in revised schedule VI, it is clear that the exchange fluctuation has to be part of Other expense or Other income seperately.
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