1989 (3) TMI 79

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....he capital under the said Schedule ?" The assessment year involved in this reference is the assessment year 1974-75, for which the relevant accounting period is the year ended on December 25, 1973. The facts of the case, as found by the Tribunal, are stated as under : The General Reserve as on the first day of the relevant previous year included a sum of Rs. 9,21,238 which was credited to the General Reserve in the year 1971. The assessee had, earlier, taken a dollar loan from the export-import Bank, Washington, and purchased plant and machinery for its "Chemex" unit. The loan was being repaid with interest on deferred payment basis in instalments. In 1971, the dollar was devalued and the assessee gained a sum of Rs. 9,21,238 on ac....

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....uting the capital". On further appeal, the Appellate Tribunal held as follows: "The assessee, undoubtedly, derived exchange gain as a result of devaluation of the dollar. This gain was not allowed as a deduction of the dollar (sic). This gain was not allowed as a deduction in computing the taxable profits. It is true that this gain related to the plant and machinery account and should have been credited to that account, but the assessee, instead, credited the said amount to the general reserve account. This act, on the part of the assessee, in our view, does not alter the position and we fail to see how the said exchange gain could be reduced from the general reserve account. The exchange gain has not been allowed as deduction in comp....