Forex loss on purchase of raw materials

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 April 2013 What should be the treatment of forex loss/gain arising due to restatement of Creditors for Raw Materials.

CA Ankit Oberoi

CA Ankit Oberoi (Expert)
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15 April 2013 loss on account of exchange difference arising due to restatement of liability at the year end exchange rate is not to be regarded as notional/contingent loss, when the assessee follows Mercantile System of Accounting.

for income tax purpose, in the case of assessee following the Mercantile System of Accounting, such loss arising on account of fluctuation in the foreign exchange rate at the year end is deductible while computing the business income in all bonafide cases