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TMI Blog2004 (4) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... section 37?" - After the income is received, it becomes capital and for transferring the same on account of fluctuation in exchange rate, the loss occasioned cannot be treated as business expenditure – Hence, we answer question No. 1 in favour of the Revenue - question No. 2 is not required to be examined. - - - - - Dated:- 8-4-2004 - Judge(s) : B. C. PATEL., BADAR DURREZ AHMED. JUDGMENT The judgment of the court was delivered by B.C. Patel C. J. - At the instance of the Revenue under section 256(2) of the Income-tax Act, 1961, the following two questions have been referred by the Income-tax Appellate Tribunal: "1. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Officer denied the same against which, the appeal was preferred by the assessee before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner deleted the addition of Rs. 77,986, against which the Revenue preferred an appeal before the Income-tax Appellate Tribunal (for short "the ITAT"). By order dated February 8, 1979, the Income-tax Appellate Tribunal upheld the said deduction and confirmed the order made by the Appellate Assistant Commissioner. On behalf of the Revenue, it is contended that the exchange loss is capital in nature as it arose after income was already received in India. As per the agreement, the amount was paid in Indian rupees equivalent to 2.6 US cents per barrel. It is after receipt of the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved and later on is transmitted to the Republic of Panama and on account of fluctuation there is a loss, then the same cannot be treated as an expenditure by way of trading loss or business expenditure. Where profit and loss arose on account of appreciation or depreciation in the value of foreign currency held by the assessee on conversion into another currency, such profit or loss would ordinarily be trading profit or loss, if the foreign currency is held by the assessee on revenue account or as a trading asset or as part of circulating capital embarked in the business. On the other hand, if the income which is already received by the assessee is held as a capital asset and for converting the same in foreign currency if there is profit or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining approvals for seeking approval for remittances only. The Appellate Assistant Commissioner has clearly pointed out that the contract provides for a calculation of the payments in US currency yet the payment is stipulated to be made in Indian rupees. It was agreed by the assessee to accept the fees in Indian rupees equivalent to US dollars, i.e., to say, the date on which fees were received considering the market rate of exchange for US dollar into rupees. The amount was received in rupees. Therefore, it is incorrect to say that the amount which was transmitted is to be treated as revenue receipts as part of the appellant's business activities and incidental to its trading. In the opinion of the court when Cochin Refineries Ltd., paid i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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