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TMI Blog2012 (10) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside as a provision in diminution of any asset as per explanation 1(i) below Section 115JB(2). 3. Income under Section 115JB - increased by Rs.2,83,000/- being dividend refundable to the purchasers - The CIT(A) has erred in confirming that the income u/s. 11 5JB of the Income Tax Act, 1961 be increased by an amount of Rs.2,83,000/- being dividend refundable to purchasers, as the said amount is an unascertained liability as per explanation 1(c) below Section 115JB(2)." 2. Apropos Ground No.1, the facts are that assessee is a nonbanking finance company, which was earlier known as " The Investment Corporation of India Ltd". It had purchased 1000 shares of Swadeshi Industrial Works Ltd., Sri Lank through a market purchase in June, 1946, i.e. prior to independence of India & Sri Lanka. Thereafter, Right Issue was made on 22/04/1947 by which the assessee was entitled to get 500 shares. Subsequently, some bonus shares were also issued and holding of the assessee in the said company as on 31/3/1999 was 2800 shares. In 1999 assessee received an offer from Forbes ABN Amro Securities (Pvt. ) Ltd., Colombo for purchase of 2800 shares at Sri Lankan Rupees 2700 per share and after obtai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "1. CIT v. Woodward Governor India P. Ltd. (321 ITR 25- Supreme Court Loss suffered on account of exchange difference as on the date of the balance sheet is an item of expenditure u/s.37(1). I 2. ONGC v DCIT (261 ITR (AT) -1I (ITAT - Delhi).- Loss on foreign exchange is a fait accompli & not a notional one & as per Accounting Standard - 11 & as the account are maintained on a Mercantile Basis, the Loss is allowable u/s.37. 3) CIT vs. Dempo & Co. Pvt. Ltd. (206 ITR 291) - Mumbai High Court To determine whether devaluahon is a revenue loss or capital loss, what is relevant is the utillsatlon at the time of devaluation & not the object for which the loan had been obtained. If at the time of devaluation, the asset had changed its character & had asumedanew character of stock-in-trade, or circulating capital, the loss shall be on revenue account. 2.2 The assessee has also placed reliance on the decision in the case of Reliance Energy Ltd. Vs. DCIT, 290 ITR (AT) 344 (Mum). It was submitted that the facts of that case are almost similar and from the held portion the following quotation was referred: The assesseé had a wholly owned subsidiary company in Saudi Arabia, in acquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y 1999-2000 the long term capital gain was offered to tax and it was accepted by the revenue. It is thus pleaded by Ld. A.R that addition has wrongly been sustained by Ld. CIT(A) and it should be deleted. 2.4 On the other hand, Ld. D.R relied upon the orders of AO as well as CIT(A). 2.5 We have considered the rival submissions in the light of the material placed before us. The facts mentioned above are not controverted by the revenue. When the assesse sold the shares the capital gain was declared in A.Y 1999-2000 and no part of the shares is being held by the assessee. It is only a part of sale proceeds of those shares which could not be repatriated by the assessee which were kept in Sri Lanka in blocked account for which the permission is yet to be obtained by the assessee. According to aforementioned decision of the Co-ordinate Bench in the case of Reliance Energy Ltd. vs. DCIT(Supra) the loss on foreign currency cannot said to have connection whatsoever with capital loss simply for the reason that the proceeds belong to shares which were held by the assessee as investment. After sale the character of the amount received by the assessee had changed and it became current or ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also the case of the assessee that similar issue came into consideration before the Tribunal in the case of assessee itself for A.Y 2006-07, where such claim of the assessee was accepted by the Tribunal and reference was made to order dated 15/7/2011 in ITA No.4448/M/10, copy of which is placed at pages 48 to 56 of the paper book, wherein the department has agitated similar deletion of Rs. 14,33,000/- on the ground that the excess dividend recovered by the assessee during the year which was not refunded to rightful owners has wrongly been deleted. Reference was made to following observation of the said decision of the Tribunal: "7. We have considered the rival submissions. At the outset we have to reject the argument of the learned D.R. that the character of the sum in dispute has not been established by the Assessee to be a dividend paid on shares which it had transferred and that the dividends have to be refunded to the rightful owners. In this regard, neither the AO nor the CIT(A) disputed facts regarding the claim of the assessee in this regard. it is not open to the revenue for the first time in an appeal before the tribunal to raise such an issue. it was submitted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right to the sum received. Otherwise, the recipient would only be holding the money so received in trust for the lawful owner of the money. The Assessee has received dividend on shares which it had already transferred and the right to receive dividend vests with the transferee. Nevertheless, the Assessee received the sums in question because it was shown as the registered owner of the shares in the Register of Members of the Company. Sec.72 of The Indian Contract Act, 1872 lays down a person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it. It is thus clear that it is only when there is a right to receive income, income can be said to have accrued. Without legally enforceable right there can be no accrual of income. we are of the view that the assessee has no lawful right to the receipt in question nor has it claimed such a right. in such circumstances, the receipt will not assume the character of income in the hands of the assessee. On this ground itself, the appeal of the revenue deserves to be dismissed. 9. We also find that the assessee has been following consistently the method of accounting whereby the dividends recei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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