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TMI Blog1974 (11) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... al was right in sustaining the addition of Rs. 4,646 in arriving at the assessee's total income ? " A few facts may be stated : The assessee-company, which is carrying on the business of insurance other than life insurance, claimed a deduction of Rs. 21,045 as loss arising from the devaluation of the Pakistani rupee during the year 1955, being the previous year for the assessment year 1956-57. The contention of the assessee was that the balance due to the head office of the company at Bombay from their Karachi branch underwent a depreciation by reason of the devaluation of Pakistani rupee, and hence there was a loss to the company. It may be mentioned that until 31st July, 1955, the rate of exchange between Pakistan and India was 100 Paki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rule 6, so that depreciation could not be allowed. Being aggrieved by the said order, the assessee-company preferred an appeal to the Appellate Assistant Commissioner, which appeal was also dismissed by him. According to the Appellate Assistant Commissioner, this was not allowable expenditure under section 10 of the Indian Income-tax Act, 1922. The assessee-company thereupon preferred an appeal to the Income-tax Appellate Tribunal, in which six contentions were taken as are set out in para. 5 of the statement of the case. One of the contentions clearly indicated in ground (e) as set out in para. 5 was that the balance of profits should stand under rule 6 of the rules in the Schedule to the Indian Income-tax Act and the loss could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Schedule to this Act. " " Rule 6.---The profits and gains of any business of insurance other than life insurance shall be taken to be the balance of the profits disclosed by the annual accounts, copies of which are required under the Insurance Act, 1938, to be furnished to the Controller of Insurance after adjusting such balance so as to exclude from it any expenditure other than expenditure which may under the provisions of section 10 of this Act be allowed for in computing the profits and gains of a business. Profits and losses on the realisation of investments and depreciation and appreciation of the value of investments shall be dealt with as provided in rule 3 for the business of life insurance. " It was the contention of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Insurance Co. Ltd. v. Commissioner of Income-tax [1965] 55 ITR 716 (SC), where it was observed that rule 3(b) of the Schedule to the Indian Income-tax Act, 1922, did not empower the Income-tax Officer to adjust the accounts of an insurer on the basis of a re-valuation made by him or to correct the discrepancy between what is entered in the accounts and what is fact (underlining supplied). It may be mentioned that in the judgment in Life Insurance Corporation of India v. Commissioner of Income-tax [1964] 51 ITR 773 (SC) the assessee was the Life Insurance Corporation, carrying on life insurance business whereas in Pandyan Insurance Co. Ltd. v. Commissioner of Income-tax [1965] 55 ITR 716 (SC) the assessee was a public limited company carryi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions in Commissioner of Income-tax v. New India Assurance Co. Ltd. [1969] 71 ITR 761 (Bom). Question No. 3 considered by the Division, Bench in the said case pertained to the sum of Rs. 79,592 being the difference in the exchange rates of Pakistan currency before and after its devaluation on 31st July, 1955, on account of payment under section 18A of the Pakistan Income-tax Act ; and the court was called upon to consider whether the said amount was deductible under any of the provisions of the Income-tax Act or the Schedule. In respect of this item also the assessee-insurance company had claimed that it had sustained a business loss because of the devaluation of its currency by Pakistan. After considering the facts and the applicable author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. (Private) Ltd. v. Commissioner of Income-tax [1959] 37 ITR 66 (SC). According to the Supreme Court, " expenditure " is equal to " expense " and " expense " is money laid out by calculation and intention. By no stretch of imagination can the loss claimed by the assessee as having been sustained by it on the devaluation of the Pakistan currency be said to be money laid out by it by calculation and intention. It was also sought to be urged that there was no finding that this amount was shown as debit by way of a loss in the profit and loss account filed before the Controller of Insurance. In view of the clear observations to be found in para. 2 of the Tribunal's order dated 25th April, 1960, in which it has been stated that this was a c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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