9911796707
TMI Blog1966 (1) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... t. But, in our opinion, the fact that the assessee kept the money there does not make any difference especially, as we have pointed out, that it was a new transaction which the assessee entered into, the transaction being the first step to acquisition of capital goods. In our view the High Court was right in answering the questions in the negative. In the result the appeal fails and is dismissed. - - - - - Dated:- 13-1-1966 - Judge(s) : K. SUBBA RAO., J. C. SHAH., S. M. SIKRI JUDGMENT The judgment of the court was delivered by SIKRI J.-- This appeal by certificate granted by the High Court of Judicature at Bombay under section 66A(2) of the Indian Income-tax Act, 1922, hereinafter referred to as the Act, is directed against its judgment in a reference made to it by the Income-tax Appellate Tribunal. The following two questions were referred : " (1) Whether on the facts and in the circumstances of the case, the surplus or difference arising as a result of devaluation in the process of converting dollar currency in regard to the sum of $36,123.02 repatriated to India was profit which was taxable in the hands of the assessee ? (2) Whether the said sum of $36 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the same would go to reduce the amount of remittance to be made from here in recoupment of that amount from time to time. These amounts will be utilised solely for the purposes detailed in our letter to you TC 679 dated 15th August, 1946." The purposes referred to in the said letter of August 15, 1946, were purchase of capital goods. The amount received as commission was taxed in the relevant assessment years on the accrual basis and tax has been paid. On September 16, 1949, there was a balance of $48,572.30 in the assessee's account with Messrs. Tata Inc., made up as under : (1) Remittances from Bombay $33,850.00 Less : Dollars spent in U.S.A. for capital purposes $30,282.96 ------------------- $ 3,567.04 (2) Amount reimbursed by Baldwin Locomotive Works against funds made available to its representatives in India $8,882.24 (3) Commission actually received from Baldwin Locomotive Works and retained in U.S.A. $36,123.02 ------------------- Total $48.572.30 On September 16, 1949, the pound sterling was devalued. Prior to the devaluation the rate of exchange between rupee and dollar was Rs. 3.330 per dollar and on devaluation the rate beca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness and formed part of the trading, receipts. The Tribunal held that the sums of $3,567.04 and $8,882.24 included in the sum of $48,572.30 were held by the assessee for capital purposes and hence any profit that arose to it as a result of its conversion into rupee currency on account of appreciation of the dollar, in relation to the rupee, must be held on capital account and, accordingly, the Tribunal excluded profits attributable to these amounts. But regarding the sum of $36,123.02 the Tribunal held that it would not be justified in coming to the conclusion that there was any constructive remittance, first in the direction U.S.A. to India and then of an equivalent sum from India to the U.S.A. It further held that the amount was earned as commission. It was received in dollars and was retained in that form for the changed purpose under the authority of the Reserve Bank of India. When the company found that the purpose for which it was to be used failed, viz., acquisition of capital equipment, etc., it requested the Reserve Bank of India to permit it to bring to India, vide assessee's letter dated 17th December, 1949, where it sought the Reserve Bank's permission to bring $40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to tax. " The High Court felt that the ratio of the decision in Davies v. Shell Company of China supported the view it had taken. The learned counsel for the revenue, Mr. A. V. Viswanatha Sastri, contends that if the commission had been allowed to remain in the U.S.A. up to September 16, 1949, and it had. been repatriated on September 17, 1949, the assessee would have been liable to tax on the profits received as a result of devaluation. He says that, if this is so the permission of the Reserve Bank and the decision of the company to hold it to buy capital goods does not make any difference. He further says that the fact that the assessee credited the rupee equivalent of this sum in his books and paid tax on the basis of accrual does not also make any difference. The learned counsel for the assessee, Mr. Palkhivala, on the other hand, contends that the assessee is not a dealer in foreign exchange and it had not acquired or held foreign exchange for revenue purposes or for purposes incidental to trading operations. He says that "when foreign currency is kept or used on capital account, e.g., to acquire capital assets, and not as circulating capital, the profit made on rea ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
