High Court rules exchange losses on remittance not deductible in computing business income.

The High Court held that losses in exchange on remittance of profits by non-resident companies are not allowable deductions in computing business income for taxation. The court emphasized that income earned in India, to be assessed in India, was in rupees, and exchange losses occurred after the income was earned. The decision aligned with previous case law and distinguished the case from another where similar losses were allowed. The judgment favored the Revenue, stating that the destination or calculation of income in a foreign currency does not impact the income of the assessee in India.

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Issues:
1. Allowability of loss in exchange on remittance of profits for non-resident companies in computing business income for taxation.

Analysis:
The judgment addresses the issue of whether the loss in exchange on remittance of profits by non-resident companies is an allowable deduction in computing business income for taxation. The Tribunal referred the question to the High Court, emphasizing the facts where non-resident companies transmitted profits to the United Kingdom and claimed losses due to exchange rate variations. The Income-tax Officer initially disallowed the losses, stating they were not related to the business. The Commissioner (Appeals) rejected the claims, considering the losses as notional. The Tribunal also dismissed the claims, highlighting that the income earned in India, to be assessed in India, was in rupees, and the exchange losses occurred after the income was earned. The judgment cited the Namdang Tea Co. Ltd. case, where a similar principle was upheld regarding the impact of Indian rupee devaluation on business profits assessed in India. The court concluded that the loss claimed by the non-resident companies was not allowable, aligning with the reasoning provided by the authorities below.

The judgment differentiated the case from CIT v. Calcutta Electric Supply Corporation Ltd., where losses due to remitting monies from India to England for dividend obligations were allowed as expenditure. However, the court found the facts in the present case akin to Namdang Tea Co. Ltd., where the impact of devaluation on business profits assessed in India was deemed irrelevant to the calculation of income. Consequently, the High Court answered the question in the affirmative and in favor of the Revenue, emphasizing that the destination or calculation of income in England in pound sterling does not affect the income of the assessee in India. The judgment was a unanimous decision by the judges, with no order as to costs.

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