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TMI Blog2000 (6) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered in 'Rupee' equivalent only. Since the assets are in India and that transfer is of shares held in Indian Company. 5. The learned CIT(A) erred in holding that the appellant's valuation based on US Dollars has to be rejected. 6. The appellant contends that the learned CIT(A) erred in not appreciating the fact that the shares were transferred for a consideration of 1,00,000 US Dollars during the previous year under consideration and is not justified in upholding the action of the Assessing Officer in computing notional capital gains based on lower value of 'Rupee' in relation to US Dollar in the year of transfer. 7. The learned CIT(A) erred in not giving direction for deletion, of interest of Rs. 28,180 charged under section 139(8) of the Income-tax Act, 1961. Though the assessee has raised so many grounds of appeal, the effective ground of appeal is against computation of capital gains in rupee equivalent. The assessee is a foreign company having its registered office at Boston, USA. The said company filed return of income on 28-2-1990 declaring capital loss of Rs. 2,56,354. The facts of the case are as follows. M/s. Abex Corpn., USA was holding shares of Denison Hydraulic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o another multi-national company Haggunds & Soner A.B. of Sweden as a package deal along with various other interest abroad for a consideration not exceeding 1,00,000 US Dollars. While effecting the transfer of shares, the RBI insisted an I.T.C.C. The assessee vide letter dated 5-1-1990 requested for an I.T.C.C. Subsequently also vide letter dated 25-1-1990 while enclosing the agreement between the above companies, the assessee's representative explained that there was no capital gain on transfer of the above shares. However, the Dy. Commissioner of Income-tax (Assts.), Special Range I, Hyderabad, who had jurisdiction at the relevant point of time issued a letter that the transfer of 1,17,000 shares results in capital gains and accordingly the company has to pay capital gains tax. The working is as follows: --------------------------------------------------------------------------------------------- Sale consideration (US Dollars) &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; Rs. 78,770 or 80,000 --------------------------------------------------------------------------------------------- The assessee filed return of income subsequent to the above letter disclosing a loss of Rs. 2,56,354. While arriving at the above figure the cost of acquisition is arrived at in US Dollars thereby arriving at a loss. 3. After hearing the above said representation, the Assessing Officer negatived the contention of the assessee and computed the income at Rs. 1,41,475. In the assessment order, the Assessing Officer has stated that since the assets are in India and the transfer is held in Indian company, the cost of acquisition as well as the sale consideration is to be considered in rupee equivalent onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot applicable to declaratory statutes. A declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of statutes. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that (if a statute is curative or merely declaratory of the previous law, retrospective operation is generally intended)." As far as the present case on hand is concerned, Rule 115A of the income-tax Rules is also a declaratory Act which stands on par with the above Supreme Court ruling. In the interest of justice after taking into consideration all the abovesaid judgment, we are here to hold that operation of Rule 115A read with section 48 of the Income-tax Act can be taken as retrospective in nature in the light of the abovesaid Supreme Court judgment. Though the assessee has not drawn the attention of the Bench to the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfer fee of Rs. 5 lakhs in US Dollars equivalent thereto. If that is so, the entire payment for acquisition of shares in question was made by the NRI company in US Dollars. The sale consideration also was received in US Dollars. The sale was made outside India. That being so, there is no reason to convert both cost of acquisition and sale consideration from US Dollars into Indian Rupees. Instead, capital gains if any should be first worked out on the basis of US Dollars only and thereafter, such capital gains worked out in US Dollars be converted into Rupee terms for levying capital gains tax. In this case, the acquisition cost being 1,23,172 US Dollars and sale consideration being 1,00,000 US Dollars, obviously there is no capital gains in terms of US Dollars, so as to be converted into Rupee-terms. Instead, there is loss, as properly worked out by the NRI Company. 6.3 In the method of computation adopted by the Assessing Officer, in effect what is being attempted to be taxed is the local effect of the devaluation of Indian Rupee against US Dollars over a period of time. It is because of that diminution in the conversion value of Indian rupee against US Dollar that the sale con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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