On September 16, 1949, there was a balance of 48,572/30 in the assessees account with Messrs. Tata Inc. made up as under Remittances from Bombay 33,850 00 Less Dollars spent in the U.S.A. for capital 30,282.
4.775 per dollar.
96 purposes 3,567.04 Amount reimbursed by Baldwin Loco 8,882.24 motive Works against funds made available to its representatives in India Commission actually received from Baldwin Locomotives Works and retain 36,123.
The Income tax Officer assessed the amount of Rs.
The High Court answered the two questions in the negative.
The amount so paid to Tata Inc. was retained in the assessees account with Messrs. Tata Inc. for purchase of capital goods.
3.330 per dollar and on devaluation the rate became Rs.
The Income tax Officer observed Whether the funds were sent to America with the object of purchasing of capital equipment or for the purchase of stores, or for reimbursement of revenue expenditure there need number be distinction that only such portion of the profits arising on funds remitted for revenue expenditure only has to be treated as revenue and the balance should be treated as capital.
A Palkivala, T. A. Ramachandran, J. B. Dadachanji, O. C. Mathur and Ravinder Narain for the respondent.
any exchange profit on such amounts which formed part of the assets employed as circulating capital in trade did arise directly in the companyrse of business and formed part of the trading receipts.
Prior to the devaluation the rate of exchange between rupee and dollar was Rs.
236 of 1965.
Hence before there was actual remittance of 40,000 from the U.S.A. to India, there was reconversion, the purpose having failed, of the sum if there was initial companyversion as companytended by Mr. Chokshi.
V. Viswanatha Sastri, N. D. Karkhanis, R. H. Dhebar and N. Sachthey, for the appellant.
70,147 on the ground that it represented profits that arose to the assessee incidentally to its carrying on the business.
Though the two remittances from the U.S.A. to India of 40,000 and 9,500 fell into different accounting years, the case proceeded before the Income tax authorities as well as before the Tribunal on the footing that the two remittances be companysidered as falling in the accounting year ended March 31, 1950 for the purpose of the appeal before the Tribunal.
As the sole selling agent the assessee was entitled to company mission from Baldwin Locomotive Works.
Dollars were changed into rupees and money received here.
In the alternative, the Tribunal held that as and when the companymission was earned in dollars, the Company did bring it into its account books in the rupee currency at the then prevailing rate of exchange but the companymission amount physically remained in the U.S.A. and when occasion arose to bring it physically to India it had to be companyverted into rupee currency and this companyversion was necessarily incidental to the asssessees business as selling agents of the foreign entity the Baldwins.
Hence whatever the profit the Company made on such exchange of the companymission earned by it in the companyrse of its 2 4 0 selling agency business must be brought to tax as a trading profit made by it incidentally in the companyrse of that business.
Appeal from the judgment and order dated August 30, 1961.
The companymission pay able to the assessee in dollars was number actually sent from the U.S.A. to India, but with the sanction of the Exchange Control Authorities was made over to the assessees purchasing agents, Messrs. Tata Inc., New York.
This permission was granted by the Reserve Bank.
The remittances of 49,500 includes the sum of 48,572/30 that was held by the assessee on September 16, 1949.
Whether the said sum of 36,123/02 having been taxed in the relevant earlier years, the surplus or difference in dollar exchange account arising by reason of the repatriation thereof as a result of devaluation was rightly taken as profit taxable ?
The amount received as companymission was taxed in the relevant assessment years on the accrual basis and tax has been paid.
The purposes referred to in the said letter of August 15, 1946, were purchase of capital goods.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
of the Bombay High Court in Income tax Reference No.
The Judgment of the Court was delivered by Sikri, J. This appeal by certificate granted by the High Court of Judicature at Bombay under s. 66 A 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.
He was further of the view that the amounts available for remittance companysisting of the companymission and the reimbursement of expenses by Baldwin Locomotive Works were acquired in the ordinary companyrse of business of the sole selling agency of Baldwin Locomotive Works, and, therefore.
These amounts will be utilised solely for the purposes detailed in our letter to you TC 679 dated 15th August, 1946.
The reason why this was done was explained in the assessees letter dated October 26, 1948, to the Reserve Bank of India.
In it the assessee stated, inter alia, as follows It would be more companyvenient if the amount of companymission payable to us periodically be deposited into our account with our representative, Messrs. Tata Inc., New York, opened with reference to your letter FC.BY.
These expenses were re imbursed to the assessee by Baldwin Locomotive Works in the U.S.A. by paying the amount due to Messrs. Tata Inc., New York.
The assessee was also the selling agent of Baldwin Locomo tive Works, for the sale of their products in India, and in companynection with the sale of the products of Baldwin Locomotive Works in India the assessee had to incur expenses on their behalf in India.
12 of 1959.
The relevant facts and circumstances, as stated in the Statement of the Case, are as follows The respondent, Tata Locomotive and Engineering Co. Ltd., hereinafter referred to as the assessee, is a limited companypany registered under the Indian Companies Act VII of 1913 , and has its registered office at Bombay.
ed in the U.S.A. TOTAL 48, 572.30 On September 16, 1949, the pound sterling was devalued.
7031/74/46 dated 2nd October, 1946, 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.
The Appellate Assistant Commissioner substantially affirmed the odrer of the Income tax Officer except that he reduced the amount by Rs.
Under similar circumstances in October, 1950, a sum of 9,500 was repatriated to India.
70,147 as surplus in the process of companyverting dollar currency into rupee currency.
This character was retained right up to September 16, 1949 when the pound sterling was devalued, and it did number undergo any change till the benefit accrued on this amount to the assessee companypany as a result of change in the exchange rate.
This repatriation of the sum of 48,572/30 gave rise to a sum of Rs.
The Reserve Bank of India gave permission and a sum of 40,000 was repatriated to India.
