9911796707
TMI Blog2002 (3) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The assessee, a commercial airline, is a Hongkong based foreign company which is engaged in the business of aircraft operations. Its income is assessed under the provisions of section 44BBA of the Income-tax Act, 1961. During the course of assessment proceedings, Assessing Officer noticed that, in the relevant previous year, the assessee had received HK $ (Hong Kong Dollars) 6,22,62,223. It was further noted that this foreign exchange earning was converted, for the purpose of computing rupee value so as to work out the tax liability under section 44BBA, by taking 60 per cent thereof at the 'market rate of exchange' while the remaining 40 per cent was converted at the 'official rate of exchange'. The assessee thus converted HK $ 3,73,57,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the addition and upheld the computation of rupee value of foreign exchange earnings made by the assessee. Revenue is aggrieved and in appeal before us. 3. Rival contentions are conscientiously heard, orders of the authorities below carefully perused, and applicable legal position duly deliberated upon. 4. It may be useful to reproduce Rule 115 of the Income-tax Rules, 1962, before we address ourselves to the core issue in this appeal. Rule 115 provides as follows: "Rate of exchange for conversion into rupees of income expressed in foreign currency.--(1) The rate of exchange for the calculation of the value in rupees of any income accruing or arising or deemed to accrue or arise to the assessee in foreign currency or received or de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... geable under the head "Capital gains", the last day of the month immediately preceding the month in which the capital asset is transferred: Provided that the specified date, in respect of income referred to in sub-clauses (a) to (f) payable in foreign currency and from which tax has been deducted at source under rule 26, shall be the date on which the tax was required to be deducted under the provisions of the Chapter XVII-B." (2) Nothing contained in sub-rule (1) shall apply in respect of income referred to in clause (c) of the Explanation to sub-rule (1) where such income is received in, or brought into India by the assessee or on his behalf before the specified date in accordance with the provisions of the Foreign Exchange Regulation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ittedly not applicable here. In view of these discussions, we are of the considered view that so far as notional conversion of foreign exchange earnings into Indian rupees, of earnings expressed in foreign exchange, is concerned, the relevant rate of exchange is the 'telegraphic transfer buying rate' adopted by the State Bank of India as on the last date of the previous year, irrespective of the actual date or period of such foreign exchange earnings. 6. There is no dispute about the fact that Liberalised Exchange Rate Control Rate Management System (LERMS) was in force as on the 'specified date' i.e. 31-3-1992, for which notional conversion was to be done. We further find that in terms of AD(MA) Circular No. 11, dated 29-2-1992, issued b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... = HK $ 30 (Official Rate of Exchange) and Rs. 100 = HK $ 24.95 (Market Rate of Exchange). In view of these facts, we see no infirmity in assessee's converting 60 per cent of HK $ earnings during the year @ Rs. 100 = HK $ 24.95 and balance amount @ Rs. 100 = HK $ 30. We, therefore, support the conclusion arrived at by the CIT(A) and decline to interfere in the matter. 7. Before parting with this matter, we may also mention that if the LERMS conversion method was applied only to the earnings for the month of March 1992, the rupee value of foreign exchange earnings of the assessee would have been far less than the earnings computed by the assessee, since, in that case, entire earnings for first eleven months were to be notionally converted a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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