OIL & NATURAL GAS CORP. LTD. TR. M.D. vs COMMR.OF INCOME TAX, DEHRADUN

The Supreme Court addressed whether fluctuations in exchange rates for loans taken for revenue purposes can be deducted under Section 37(1) of the Income Tax Act, 1961, in the year of fluctuation or only upon repayment. The Court held that such losses can be recognized as deductions in the year of fluctuation, establishing that the actual cost of imported capital assets can be adjusted for exchange rate fluctuations at each balance-sheet date pending actual payment. The ruling clarifies the treatment of foreign exchange losses in both revenue and capital accounts under Sections 37(1) and 43A of the Act.