TaxTMI 
TaxTMI 
1980 (1) TMI 39
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.... be allowed as a deduction in the assessment ? " The assessee is a partner in a firm in Ceylon. He has a house property in India and also in Ceylon. He has also income by way of salary earned abroad. From an extract of the period of stay in India filed by the representative of the assessee before the ITO, it was seen that during the seven years preceding the previous year for the assessment year 1972-73, the assessee was in India for 890 days, and under s. 6(6)(a) if the assessee's stay in India during the above-said period was 730 days or more, his status was that of an ordinarily resident person. The ITO, therefore, took the status of the assessee as an ordinary resident. The assessee returned the Indian property income at a minus f....
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....nal. The Tribunal noticed that the past profits had been taxed in the relevant assessment years on accrual basis and that the current profit also was taxed on the same basis. The claim of the assessee before the Tribunal was that when a smaller sum was received than what was taxed in the earlier years, then there would be a loss which should be allowed as deduction. In the opinion of the Tribunal, since the income derived from the foreign firm was from business, the character of the income in the hands of the recipient was also under the head " Business " and that the real income theory would be applicable to the assessee. The remittances were taken to involve certain expenditure in reaching the destination, i.e., from Ceylon to India. Even....
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....relied strongly on the decision of the Supreme Court in Sutlej Cotton Mills Ltd. v. CIT [1979] 116 ITR 1. In that case, the assessee, a limited company, had a cotton mill in West Pakistan carrying on business of manufacturing and selling cotton fabrics. From this business, there was a substantial profit of Rs. 1,68,97,232, which was assessed in the year 1954-55. Subsequently, a sum of Rs. 37,50,000 was remitted to India and on account of the variation in the exchange rate, the actual amount that reached India was smaller and the assessee thus suffered a loss of Rs. 11 lakhs. The question was whether this difference was liable to be allowed as deduction. The Supreme Court enunciated the principle in two or three passages which we may quote w....
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.... transactions and was, therefore, liable to be taxed. The principle of this decision was set out by the Supreme Court in the following words at page 8 (of 116 ITR) : " Since the dollars were purchased for the purpose of carrying on the business as sole commission agents and as an integral part of the activity of such business, it was held that the profit arising on retransfer or re-exchange of dollars into sterling was a trading profit falling within Case I of Schedule D." Thereafter, reference was made to another decision in Imperial Tobacco Co. Ltd. v. Kelly [1943] 25 TC 292 (CA). In that case, the assessee bought American dollars for the purpose of purchasing in the United States tobacco leaves. Before the purchase could be effecte....
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....of circulating capital embarked in the business. But, if on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature. Now, in the present case, no finding appears to have been given by the Tribunal as to whether the sums of Rs. 25 lakhs and Rs. 12,50,000 were held by the assessee in West Pakistan on capital account or revenue account and whether they were part of the fixed capital or of circulating capital embarked and adventured in the business in West Pakistan. If these two amounts were employed in the business in West Pakistan and formed part of the circulating capital of that business, the loss of Rs. 11 lakhs and Rs. 5,50,000 resulting to the assessee on remissi....