COMMR.OF INCOME TAX, DEHRADUN vs M/S ENRON OIL & GAS INDIA LTD.

The Supreme Court ruled that under Section 42(1) of the Income Tax Act, 1961, EOGIL is entitled to claim a foreign exchange loss of Rs. 38,63,38,980 as a deductible expense, rejecting the Department's assertion that it was merely a book entry. The Court emphasized that the loss incurred was real and related to the actual business operations of EOGIL as a foreign company operating in India. The decision of the ITAT to allow the deduction was upheld, affirming that the Department cannot selectively tax gains while denying losses.