Bhupesh (student) (353 Points)
10 September 2009In AS it is written that when assets is purchased from foreign at credit and when there is price increased due to exchange rate difference we have to charges it to P& L account at the end of the year. But in taxation instead of charging to P&L the assets cost is increased why it is so?????
santhosh
(CA)
(636 Points)
Replied 10 September 2009
Good Question !
After Amendment in AS-11 and Ssch VI , FOREX diff arising in liability towards purchase of Fixed assets is written off to P&L is mandatory.
But for Income tax all expenses incurred towards Purchase of Capital Asset ( inc Such FOREX Diff) is Capital Expenditure and therefore not allowed to be written off in P&L.Even if it charged it is Disallowed. Similar diff between Accounting and taxation exist is other areas ( e.g Treatment of Borrowing Cost, Leases etc
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