Eicher Motors Ltd. vs Deputy Commissioner Of Income Tax ... on 31 May, 2002
13.1 Ground No. (iii) The facts in brief are that the assessee claimed allowance of Rs. 7,21,000 on account of exchange loss incurred in relation to the payment of royalty to Mitsubishi Motor Corporation of Japan (MMC). The submissions of the assessee were that the royalty payment by the assessee to MMC for the last quarter of financial year 1990-91 being Japanese Yen 2,12,465 was provided in books at Rs. 35,66,236 on the basis of exchange rate prevailing on 31st March, 1991. The aforesaid royalty and royalty for the period from April, 1991 to June, 1991 was remitted in November, 1991 after deduction of tax at source. At the time of remittance, due to variation in exchange rates, the liability of royalty pertaining to January, 1991 to March, 1991 came to Rs. 42,87,717.68. The difference of Rs. 7,21,000 was thus claimed as loss incidental to business. The AO rejected the claim of loss alleging that the assessee had failed to establish that the additional liability crystallised during the relevant previous year and that the same was not in the knowledge of the assessee in the earlier previous year. The learned CIT(A) upheld the disallowance relying on the decision of the Hon'ble Supreme Court in the case of Shri Sajjan Mills Ltd. v. CIT (1985) 156 ITR 585 (SC) and the decision of the Hon'ble Bombay High Court in the case of Carona Sahu Co. Ltd. v. CIT (1995) 213 ITR 106 (Bom).