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TMI Blog1981 (12) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... t the rate mentioned in the certificate. He, therefore, held that the capital gains had accrued inIndiaand could only be ascertained on rupee basis. After deducting the cost of these shares, amounting to Rs. 47,600, from the sale proceeds of Rs. 97,153, the ITO computed the capital gains at Rs. 49,553 which he brought to charge. 3. The appellant preferred an appeal objecting to this assessment made by the ITO. Since none appeared on behalf of the appellant, the Commissioner (Appeals), disposed of the appeal, on merits, ex parte, after examining the contentions raised by the appellant in its grounds of appeal. The Commissioner (Appeals) held that the basic fact was that the transactions, viz., the purchase of shares of Bharat Steel Tubes Ltd. and their sale, had taken place in Indian currency and not in foreign currency as urged by the assessee and that rule 115 of the Income-tax Rules, 1962 'the Rules' was not at all attracted, for the simple reason that the capital gains accruing or arising to the appellant had not accrued or arisen in foreign currency on the facts stated by the appellant itself and that the shares were sold at Delhi Stock Exchange through J.S. Sawhney Co. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rials placed before us. 5. Shri Gupta did not press Ground No. 1 against the decision of the Commissioner (Appeals) who passed an ex parte order. Accordingly, the said ground is rejected as not pressed. 6. The remaining point in the appeal is about the determination of capital gains at Rs. 49,553 as against Rs. 16,020 worked out by the assessee. The first submission of the learned counsel for the appellant is that section 45 of the Income-tax Act, 1961 ("the Act"), would not apply to the appellant's case as deemed or illusory capital gains were being taxed. We are unable to accept this submission of the learned counsel. As rightly held by the Commissioner (Appeals) both the transactions of purchase and sale of these shares were real transactions which have given rise to real capital gains. There is nothing fictional or illusory about the capital gains in the present case. On the contrary, the appellant, itself, had declared capital gains of Rs. 16,020 in its return of income. Therefore, this contention has to be rejected. 7. It was next argued by Shri Gupta that the cost of acquisition of the shares should be adjusted so as to allow the benefit of devaluation in the cost. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been extracted in paragraph 3 above. For purposes of assessment, at that stage, certainly it was of no consequence whether the two companies inter se calculated the amount in terms of dollars or rupees. So far as the Indian revenue was concerned the assessee became entitled to a certain sum of money in terms of rupees. That amount was duly disclosed by the assessee in its earlier assessments and also brought to tax. But then the position altered with the introduction of the devaluation onthe 6th of June, 1966. It is as a result of this devaluation that the assessee-company found that if the commission, worked out in terms of rupees, was remitted to it, it would not be getting the dollar equivalent provided for in the agreement and that if that dollar equivalent was to be provided, then additional engineering fee would have to be remitted to it. This right of the assessee-company to receive additional engineering fees in terms of rupees accrued or arose on the 6th day of June, 1966. This right arose by virtue of the clause of the agreement which specifically stipulated that, in computing the engineering fee, the currency conversion rates shall be applied as at a particular date. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of these shares, therefore, could be computed only in rupees and not in any other currency. We, therefore, hold that the method adopted by the learned lower authorities in computing the capital gains was proper." We entirely agree with the abovementioned orders of our learned brothers in both the cases. We may point out that the facts in the case of Arwood Corporation are similar to the facts in the present case. We are unable to agree with the learned counsel that these decisions of the Tribunal are distinguishable from the facts of the present case. As rightly contended for the revenue, the capital gains in question have actually accrued to the appellant within India and hence are chargeable under section 5(2)(b) and not under section 9 of the Act. The shares were also purchased by the appellant that Bharat Steel Tubes Ltd. has maintained any foreign register as required by sections 157 and 158 of the Companies Act, 1956 (sic). The learned departmental representative is right in his submission that the acquisition and the payment of consideration for acquisition of shares being in India in Indian rupees to the Indian company and since sale was also in India and in Indian curr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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