1958 (8) TMI 58 - HC - Income Tax

Summary

Issues Involved:
1. Determination of the cost price of properties purchased during the Japanese occupation of Malaya.
2. Conversion of Japanese currency to Malayan currency for tax assessment.
3. Applicability of the Malayan Ordinance conversion table.
4. Impact of the special scheme for relief on the valuation of properties.
5. Consistency with the assessee's method of accounting.

Detailed Analysis:

1. Determination of the cost price of properties purchased during the Japanese occupation of Malaya:
The assessee, a Hindu undivided family, purchased properties during the Japanese occupation of Malaya using Japanese currency. The initial cost was recorded as 51,670 Japanese dollars. The properties were later sold in Malayan currency. The court had to determine the correct cost price for tax assessment purposes.

2. Conversion of Japanese currency to Malayan currency for tax assessment:
The court emphasized that to compute profits or losses, the purchase price paid in Japanese currency had to be converted to Malayan currency. The Japanese currency had depreciated significantly during the occupation, and by the time of sale, it had no value. Therefore, the conversion was necessary to establish a common standard for comparison.

3. Applicability of the Malayan Ordinance conversion table:
The Malayan Ordinance provided a conversion table for depreciated Japanese currency to Malayan currency. The Tribunal used this table to convert the purchase price of 51,670 Japanese dollars to 20,036 Malayan dollars. The court upheld this approach, noting that the Ordinance was based on a thorough attempt to ascertain the value of Japanese currency relative to Malayan currency during the occupation period.

4. Impact of the special scheme for relief on the valuation of properties:
The assessee had opted for a special scheme introduced by the Government of India to provide relief for losses incurred during the Japanese occupation. Under this scheme, the properties were revalued at 33,700 dollars for the purpose of computing losses. The court noted that this valuation was ad hoc and for the specific purpose of the scheme, not for regular tax assessment. Therefore, the valuation under the scheme did not affect the cost price determination for the assessment year 1952-53.

5. Consistency with the assessee's method of accounting:
The assessee consistently valued stock-in-trade at its original cost price. The court pointed out that the real cost price had to be ascertained in Malayan currency, which was 20,036 dollars. The valuation of 33,700 dollars under the special scheme was not consistent with the assessee's normal accounting method and was not applicable for regular assessment purposes.

Conclusion:
The court concluded that the Tribunal was correct in converting the purchase price to 20,036 Malayan dollars using the Malayan Ordinance conversion table and computing the profit from the sale at 4,464 dollars. The intervention of the special scheme did not alter this computation. The question referred to the court was answered in the affirmative and against the assessee, who was ordered to pay the costs of the reference.