Bombay H.C : Whether, on the facts and in the circumstances of the case, the said losses of Rs. 15,19,078 and/or Rs. 1,57,910 arising from the devaluation of the Indian rupee arose in the course of or incidental to the assessee’s business and were allowable as revenue deductions ?

High Court Of Bombay

CIT vs. Vicks Products Inc.

Sections 28, 45, 37

S.P. Bharucha & T.D. Sugla, JJ.

IT Ref. No. 127 of 1976

8th December, 1988

Counsel Appeared

Bhatia, S.V. Naik & K.C. Sidhwa, for the Revenue : E.S. Dastur & Shobha Chhabria, for the Assessee

D. SUGLA, J.:

Two questions of law have been referred to us by the Tribunal. They read thus :

At the instance of the CIT :

“1. Whether, on the facts and in the circumstances of the case, the said losses of Rs. 15,19,078 and/or Rs. 1,57,910 arising from the devaluation of the Indian rupee arose in the course of or incidental to the assessee’s business and were allowable as revenue deductions ?”

At the instance of the assessee :

“2. Whether, on the facts and in the circumstances of the case, the loss of Rs. 9,92, 292 was an allowable revenue loss ?”

Counsel are agreed that the question referred to us at the instance of the Department is covered by this Court’s decisions in CIT vs. IBM World Trade Corporation (1986) 52 CTR (Bom) 64 : (1986) 161 ITR 673 (Bom) : TC14R.921 and CIT vs. Vitre Engineering Co. (1984) 37 CTR (Bom) 197 : (1984) 150 ITR 183 (Bom) : TC14R.927, and that following the abovesaid decisions, the question requires to be answered in the affirmative and in favour of the assessee. Accordingly, the question is so answered.

As regards the question raised at the instance of the assessee, Shri Dastur, learned counsel for the assessee, has placed reliance on the Supreme Court decision in the case of Sutlej Cotton Mills Ltd. vs. CIT 1978 CTR (SC) 155 : (1979) 116 ITR 1 (SC) : TC14R.891. It is admitted that the loss has occurred due to the devaluation of unremitted profits lying with the assessee in India. According to Shri Dastur, the facts in this case are akin to the facts in the Supreme Court case and, therefore, the matter should be sent back to the Tribunal for finding out whether the unremitted profits were kept for trading purposes or for capital purposes.

In our view, the facts in the Supreme Court decision are entirely different. In the instant case, the profits which are unremitted were earned in the past. Income-tax had already been levied on them on the basis of their value in Indian currency. Only when these profits are hereafter remitted, their exchange value will be less in terms of dollars in foreign currency due to devaluation. It is a simple case of transfer of profits after they are earned. Such depreciation in the value of profits after they are earned in foreign currency cannot be a revenue loss. In this view of the matter, the question referred at the instance of the assessee requires to be answered in the negative and against the assessee. It is so answered.

No order as to costs.

[Citation : 177 ITR 556]

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