Currency translation for stock-in-trade cost: ad hoc relief valuation cannot replace true cost in profit computation.

Where stock-in-trade was purchased in Japanese currency and resold for Malayan currency, profit had to be computed on a common currency basis by translating the purchase price into the sale currency through a reliable conversion table. The valuation adopted under a special occupation-period relief scheme was only an ad hoc figure for that limited purpose and could not displace the true cost of stock-in-trade for income-tax assessment. On that basis, the reassessment of the stock at 20,036 Malayan dollars and the resulting profit on resale were upheld, and the assessee's challenge failed.

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Issues: Whether the cost of stock-in-trade purchased during the occupation period in Japanese currency had to be converted into Malayan currency for computing profit on resale, and whether the valuation fixed for relief under the occupation-period scheme could be adopted as the cost price for income-tax assessment.

Analysis: The relevant accounting principle required profit to be computed on a common currency basis where purchase and sale were in different currencies. Since the sale proceeds were realised in Malayan currency, the purchase price paid in Japanese currency had to be converted into Malayan currency to ascertain the true cost of the stock-in-trade. The conversion table in the Malayan ordinance schedule was accepted as a reliable basis for that purpose. The valuation of 33,700 dollars accepted under the special relief scheme was only an ad hoc figure for a different object, namely relief for the occupation period, and did not alter the assessee's normal method of valuing stock-in-trade at cost. That scheme valuation could not therefore replace the true cost for the later assessment year.

Conclusion: The revaluation at 20,036 Malayan dollars was justified and the resulting profit of 4,464 dollars on resale was correctly assessed.

Final Conclusion: The question was answered in favour of the Revenue, and the assessee's challenge to the computation of profit failed.

Ratio Decidendi: Where stock-in-trade is purchased in one currency and sold in another, the cost must be translated into the sale currency on a reliable conversion basis for profit computation, and an ad hoc valuation made for a different statutory relief scheme cannot be substituted for the true cost in taxation assessment.

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