TaxTMI 
TaxTMI 
TaxTMI 
2004 (4) TMI 10
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....rnings into foreign currency for remittance abroad under the terms of the agreement with its Indian collaborators is an admissible business expenditure? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the expenditure incurred by the assessee for remittance abroad of income earned in India is laid out wholly and exclusively for the purpose of its business and is an admissible deduction under section 37 of the Income-tax Act?" The assessee is a non-resident corporation having its headquarters in the Republic of Panama and a branch office at New Delhi. The assessee entered into a technical service agreement on February 26, 1969, with Cochin Refineries Ltd. According to the agreeme....
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....the same was to be made in Indian rupees. The agreement is also clear that the amount is to be paid in Indian rupees equivalent to 2.6 US cents per barrel. Thus the amount was paid keeping in mind the exchange rate, on the date of payment. The assessee may in the course of its trading transaction, such as purchase of goods abroad, which involves as a necessary incidence of the transaction itself as also the purchase of currency of foreign country concerned and, in such a case, profit resulting from appreciation or loss resulting from depreciation of the foreign currency embarked in the transaction would prima facie be a trading profit or a trading loss. It is required to be noted that the amount which was received is in the nature of capit....
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....set, then there is no question of considering the same towards trading loss. It is also required to be noted as held by the apex court in the case of Sutlej Cotton Mills Ltd. v. CIT [1979] 116 ITR 1 if there is any loss on account of depreciation of the currency which is embarked or adventured in the business and is part of the circulating capital, it would be a trading loss, but depreciation on fixed capital on account of alteration in exchange rate would be capital loss. If the amount in foreign currency is utilised or is intended to be utilised in the course of business or for a trading purpose or for effecting a transaction on revenue account, loss arising from depreciation in its value on account of alteration in the rate of exchange ....
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....ceived became its income. Thereafter the amount is converted and transmitted, as a result of which on account of fluctuation if there is loss, it cannot be treated as a business expenditure. If, on the same date the amount was transmitted, there may not be question of any loss but if the assessee for reasons best known to it has kept the amount in Indian currency and has suffered a loss, the same cannot be considered as business expenditure. The court is required to consider the assessee's taxable income when it is received. The exchange loss was not connected with the royalty and, therefore, cannot be treated as a business expenditure. The Tribunal has also erred in coming to the conclusion that when the assessee transferred part of its ....