Commissioner Of Income Tax, Delhi vs M/S Woodward Governor India P. Ltd

The Supreme Court addressed the deductibility of exchange rate fluctuations under Section 37(1) of the Income Tax Act, determining that such fluctuations related to loans for revenue purposes can be deducted in the year they occur, rather than only in the year of repayment. The Court also held that the actual cost of imported assets can be adjusted for exchange rate fluctuations at each balance sheet date until actual payment is made. This ruling clarifies the treatment of foreign exchange fluctuations in tax assessments, favoring the taxpayer's position.