Bombay High Court
Chowgule And Co. Ltd. vs Commissioner Of Income-Tax And Others on 3 March, 1992
Equivalent citations: 1992(3)BOMCR256, [1992]195ITR810(BOM)
JUDGMENT M.L. Dudhat, J.
1. The petitioners in this writ petition have challenged the order passed by respondent No. 1 on March 30, 1989, and also have challenged the vires of rule 115(c) of the Income-tax Rules, 1962, under the Income-tax Act, 1961.
2. The only point to be decided in this petition is whether, on the facts and circumstances of the case, respondent No. 1, while passing an order in revision under section 263 of the Income-tax Act, was right in holding that the amount of income received in foreign exchange by the assessee during the period from July 1, 1982, to June 30, 1983, should be converted into rupees on the basis of the exchange rates prevailing as on the last date of the previous accounting year i.e., June 30, 1983. In order to understand the aforesaid controversy, it is desirable to go through certain facts of this case.
3. The petitioners in this case are a company incorporated under the Companies Act, 1956. The petitioners are exporting iron ore to foreign countries, more particularly to Japan. The petitioners entered into agreements for sale of iron ore with foreign buyers at certain prices. As per he arrangements between the foreign buyers and the petitioners, the foreign buyers opened a letter of credit with a bank in India. As soon as the iron ore is loaded into the ship, the bill of lading is signed by the master of the ship and the petitioners raise invoices against the foreign buyers for the price of the ore shipped. Thereafter, these documents are presented by the petitioners to their banker in rupees at the rate of exchange prevailing then. If on the date of closing of the financial year any amount of sale proceeds remains outstanding, it is converted into Indian repees at the rate of exchange prevailing of the last day of the financial year and is entered in the books of the petitioners and accounted for as their income. The petitioners further contended in the petition that, for the last many years, this method of accounting of income in respect of export sales has been accepted by the respondents and by other income-tax authorities all over the country.
4. For the assessment year 1984-85, the Assessing Officer accepted the income from the exports of the petitioners returned on the aforesaid basis of accounting and passed an assessment order dated February 19, 1987. However, on March 22, 1989, the petitioners received a notice stating that the assessment order dated February 19, 1987, passed by the Assessing Officer was prejudicial to the interests of the Revenue within the meaning of the provisions of section 263 of the Income-tax Act, 1961. It was also stated in the aforesaid notice that, while arriving at the value of the sales made to various foreign companies, the Assessing Officer should have applied rule 115(c) of the Income-tax Rules, 1962, and the export earnings should have been converted into Indian rupees accordingly which the Assessing Officer failed to do. Respondent No. 1, therefore, proposed to amend the assessment order for the assessment year 1984-85 on the aforesaid grounds. To the aforesaid show-cause notice which is at annexure P-1, the present petitioners replied by their letter which is at annexure P-2, dated March 23, 1989, stating in it that the Assessing Officer was right in passing the order date February 19, 1987, and that the provisions of rule 115(c) of the Income-tax Rules, 1962, are not applicable to the facts and circumstances of the present case.
5. However, by order dated March 30, 1989, respondent No. 1 rejected the contention of the present petitioners and held that the petitioners should have converted their earnings at the rate of exchange as required under rule 115 of the Income-tax Rules, 1962. According to respondent No. 1, the petitioners are not entitled to convert their foreign exchange earnings at the rate actually prevailing on the various dates on which the amount of earnings had actually been received by the petitioners in the previous year. According to respondent No. 1, the petitioners ought to have converted their export earnings at the rate of exchange prevailing as on June 30, 1983, being the last date of the previous year as per rule 115 of the Income-tax Rules, 1962. The first respondent, therefore, directed the Assessing Officer to modify the assessment in the light of this decision.
6. The petitioners, in paragraph 8 of their petition, have stated as under :
"The application of rule 115 of the Income-tax Rules, 1962, to the petitioners' export earnings will yield the following result :
The petitioners' accounting year relevant to the assessment year 1984-85 was July 1, 1982, to June 30, 1983. Suppose goods worth 100 dollars were exported in the month of July, 1082, when the rate of exchange was Rs. 9.50 per dollar. The petitioner actually received Rs. 950 and accounted for the same as income in the books of the petitioner. If, however, on June 30, 1983, the rate moved to Rs. 10.06 per dollar then, by virtue of rule 115, the petitioner would be assessed on the amount of Rs. 1,006 even though in fact he had realised only Rs. 950 and there was no possibility or question whatsoever of recovering the additional amount of Rs. 56 which was clearly a notional figure. The petitioner would thus be taxed on an amount which was not only not received, but to which he was not entitled at any time and which the petitioner would not be able to realise and which really did not exist."
7. After going through the aforesaid contentions of the petitioners as mentioned in paragraph 8 of the petition, it becomes clear that, if the petitioners are directed to pay tax on their income in foreign exchange as per rule 115 of the Income-tax Rules, 1962, they will be required to pay tax on an amount which was not received by them and also to which they were not entitled and which amount the petitioners would not have been able to realise at any time. It is the case of the petitioners that, by applying rule 115 of the Income-tax Rules, 1962, virtually they will have to pay tax on income which was never received by them. The petitioners, therefore, contended that rule 115 is ultra vires as, by application of the same, the petitioners are made liable to pay income-tax not only on the actual income they received but also on the income which they have neigher receive nor can they realise in future. This being the position, according to the petitioners, this rule 115(c) of the Income-tax Rules, 1962, has a tendency to go beyond the scope of section 4 read with section 28 of the Income-tax Act, 1961, and, therefore, the said rule is ultra vires.
8. The petitioners have also contended that the aforesaid rule 115 was amended on April 1, 1990, and sub-rule (2) to rule 115 was added. As per the said sub-rule (2) of rule 115, nothing contained in sub-rule (1) shall apply in respect of income referred to in clause (c) of the Explanation to sub-rule (1) where such income is received in, or brought into India by the assessee or on his behalf before the specified date in accordance with the provisions of the Foreign Exchange Regulation Act, 1973 (hereinafter referred to as "the FERA, 1973"). By referring to the aforesaid amendment, it was contended on behalf of the petitioners that the aforesaid amendment being declaratory in nature or by necessary implication, declaratory as corrective in measure, is retrospective in operation. It is not in dispute in the present petition that the petitioners have received the income on or before the specified dates. Therefore, it is the contention of the petitioners that the amendment dated April 1, 1990, to rule 115 is retrospective in nature and the respondents are not entitled to apply the said rule 115(c) to the facts and circumstances of the present case.
9. On the other hand, Mr. Dias, the learned Advocate-General appearing on behalf of the respondents, contended that rule 115 of the Income-tax Rules, 1962, is completely valid. According to him, in order to avoid the laborious exercise of finding out the rate of exchange at different points of time, the rule-making power thought it wise to convert all the earnings of the previous year at the rate of foreign exchange prevailing on the last day of the previous year, which is June 30, 1989, in the present case. Therefore, the said rule does not go beyond section 4 read with section 28 of the Income-tax Act, 1961, and the rule-making power was correctly exercised under section 295. Secondly, it was also contended by Mr. Dias, the learned Advocate-General, that the amendment dated April 1, 1990, is prospective and there is nothing in the amendment to show that it is retrospective in nature. Thirdly, it was also submitted by the learned Advocate-General that if the court come to the conclusion that the said amendment is retrospective, then the same will be applicable only if it is shown that the profits of business are received in accordance with the provisions of the FERA, 1973, more particularly, section 18 of the said Act.
10. In the light of the aforesaid facts and the submissions made by learned counsel appearing on both the sides, we will now discuss the arguments as advanced to arrive at our ultimate finding.
11. Firstly, we will consider the arguments of Mr. Kakodkar, learned counsel appearing on behalf of the petitioner, that rule 115(c) of the Income-tax Rules 1962, is ultra vires, bad in law and has a tendency to override the charging provisions of section 4 read with section 28 of the Income-tax Act, 1961. Mr. Kakodkar contended that the object of the Income-tax Act is to tax the assessee on his income. The preamble to the Act also states : "An Act to consolidate and amend the law relating to income-tax and super-tax." Mr. Kakodkar further argued quoting various provisions under the Income-tax Act, 1961, to show that the power or authority to charge income-tax is given by the Legislature under section 4 read with section 28 of the Income-tax Act, 1961. It was further contended that after going through the substantive provisions of the Income-tax Act, 1961, income-tax is a tax on actual income received and not on an imaginary income. According to him, under section 295, the power to make rules is conferred on the Board but the said power is conferred on the Board to make the rules carry out the purposes of the Act, which is clear from section 295(1) of the Income-tax Act, 1961. The same reads as under :
"295. (1) The Board may, subject to the control of the Central Government, by notification in the Gazette of India, make rules for the whole or any part of India for carrying out the purposes of this Act."
12. After referring to the aforesaid provisions, it was contended by Mr. Kakodkar, learned counsel for the petitioners, that under the said provisions, the Board is vested with the power to make rules only to carry out the purposes of the Act. However, according to him, in any case, these rules cannot go beyond the circumscribed limits of the substantive provisions of the Income-tax Act, 1961. Therefore, according to him, if any rule is framed under section 295 of the Income-tax Act, 1961, which goes beyond the scope of the substantive provisions in the main Act, to that extent, the said rule will be bad in law. We do not find any difficulty in accepting this argument. But, the only question is whether, in fact, the concerned rule 115(c) has any overriding effect over section 4 read with section 28 of the Income-tax Act, 1961. To come to a right conclusion about this question, we will have to see in what manner the petitioners receive income and at what point of time income-tax is leviable. In the present case, the petitioners entered into agreements for the sale of iron ore to the foreign buyers at a certian price. This price is agreed in advance. The mode of payment is in foreign currency through the Indian banker who is authorised to give foreign exchange. Under the contract, the payment is made to the petitioners through their bankers in India. According to the petitioners, it is at this point of time when the petitioners receive money under the contract that they are liable to be taxed. the petitioners have further stated that, during the previous accounting year from July 1, 1982, to June 30, 1983, the petitioners have received various payments on different dates and the petitioners have paid tax on the actual income they received from the bank in Indian currency. It is also contended on behalf of the petitioners that, in fact, the petitioners received the money on various dates at the rate of foreign exchange prevailing on the date of the receipt of the money. The petitioners have also supplied a chart showing therein as to how, during the said relevant period, they have received the payment in Indian currency on each date as per the value of the rate of foreign exchange prevailing on the date of the receipt. The petitioners, therefore, contended that it is the actual money which they have received during the said period which is liable to be taxed under the Act and not any notional income or income which they have never received and there is no possibility of realising the same. to support this contention that, under the Act, they are liable to pay income-tax only on the amount they have actually received, the petitioners have relied upon a decision of the Supreme Court in the case of CIT v. Bangalore Transport Co. Ltd. . The Supreme Court has observed in paragraph 6 of this judgment as under (at page 375) :
"There is no warrant for his argument in the scheme of the Income-tax Act, Under section 10(1) of the Income-tax Act, 1922, tax is payable by an assessee under the head 'Profits and gains of business, profession or vocation' in respect of the profits or gains of any business, profession or vacation carried on by him. There is nothing in the Act which supports the argument that for profits of the business to be taxable, the business must be actively carried on for the whole of the previous year, or till the end of the previous year. Under the scheme of the Income-tax Act, whenever an assessee receives in the course of his business money or money's worth, income embedded therein accrues or arises to him, and becomes subject to an ambulatory charge. If at the end of the previous year, on making up accounts, there is no overall income, the charge does not crystallise because there is no income on which the charge of tax may settle. In Turner Morrison and Co. Ltd. v. CIT , this court, in dealing with a case of a business of selling salt in India, observed at page 160 of 23 ITR) :
"There can..... be no question that when the gross sale proceeds were received by the agents in India they necessarily received whatever income, profits and gains were lying dormant or hidden or otherwise embedded in them. Of course, if one the taking of account it be found that there was no profit during the year then the question of receipt of income, profits and gains would not arise but if there were income, profits and gains, then the proportionate part thereof attributable to the sale proceeds received by the agents in India were income, profits and gains received by them at the moment the gross sale proceeds were received by them in India and that being the position the provisions of section 4(1)(a) were immediately attracted and the income, profits and gains so receive became chargeable to tax under section 3 of the Act.' The same principle applies to receipts in the course of business of a transport operator."
13. In the aforesaid paragraph 6 of the judgment, a reference is made by the Supreme Court to section 10(1) of the Income-tax Act, 1922. The same provision in there at present in section 28 of the Income-tax Act, 1961. Therefore, in our opinion, whatever has been observed by the Supreme Court in the said paragraph 6 of the judgment will also be applicable to the facts and circumstances of the present case. According to the aforesaid decision of the Supreme Court, under the scheme of the Income-tax Act, whenever an assessee receives in the course of his business money or money's worth, income embedded therein accrues or arises to him, and the same becomes subject to an ambulatory charge. If, at the end of the previous year, on making up accounts, there is no overall income, the charge does not crystallise because there is no income on which the charge of tax may settle. From the aforesaid ratio as decided by the Supreme Court, it is abundantly clear that, under the scheme of the Income-tax Act, 1961, immediately after the receipt of the income by the assessee, the assessee is subjected to an ambulatory charge. In the same decision, in paragraph 7, the Supreme Court has observed as under (at page 376 of 66 ITR) :
"The total taxable profits may, under the scheme of the Act, be determined at the end of the previous year : but it does not follow therefrom that to profits earned during the year, the charge of tax does not attach."
14. In paragraph 8 of the aforesaid judgment, the Supreme Court had reiterated the aforesaid proposition by observing as follows (at page 376) :
"Counsel for the company relied upon a recent decision of this court in CIT v. Ashokbhai Chimanbhai , and contended that profits of a business which are liable to tax under the Income-tax Act, can only accrue at the end of the previous year and not before. But that case lays down no such proposition."
15. After going through the aforesaid relevant paragraphs from the Supreme Court judgment, it becomes clear that at the point of actual receipt of the payment to the petitioners, the same income becomes the subject-matter of an ambulatory charge. Therefore, the provisions of the Income-tax Act are attracted the moment the income is received and the profits, if any, from the business are to be taxed subject to the other provisions of the Act. Therefore, there is nothing in the substantive provisions of the Act that income-tax is to be charged only at the end of the previous year and not before.
16. After going through the aforesaid observations and after taking them into consideration, we are of the opinion, that under the Income-tax Act, the liability to pay income-tax in respect of the petitioners arises only as and when the petitioners receive payment from the bank under the contract and it is only the actual payment which the petitioners receive from the bank that is liable to be taxed. After considering the objects and the provisions of the Income-tax Act from the point of view as to at what point of time the provisions of the Income-tax Act are attracted to the facts and circumstances of the present case, we will try to see the effect of rule 115(c) of the Income-tax Rules, 1962. Rule 115(c) of the Income-tax Rules, 1962, reads as under :
"115. The rate of exchange for the calculation of the value in rupees of any income accruing or arising or deemed to accrue or arise to the assessee in foreign currency or received or deemed to be received by him or on his behalf in foreign currency shall be telegraphic transfer buying rate of such currency as on the specified date. . . . . .
(c) in respect of income chargeable under the heads 'Income from house property', 'Profits and gains of business or profession' (not being income referred to in clause (d)) and 'Income from other sources' (not being income by way of dividends), the last day of the previous year of the assessee."
17. On a fair reading of the aforesaid rule, if we apply the said rule to the facts and circumstances of the present case, then even when the petitioner have received payments from the buyer much before the specified date as per clause (c) of rule 115, for conversion of the foreign exchange to Indian currency, the petitioners will have to pay the tax on the basis of the rates of exchange prevailing on June 30, 1983, i.e., the last date of the previous year. And, from the contents of paragraph 8 of the petition and also from the contents of the charts of various receipts of payment from the bank during the year July 1, 1982, to June 30, 1983, if the petitioner are called upon to pay income-tax by applying rule 115(c), then the petitioners will be required to pay the tax on a far larger sum than they have actually received. As we have already seen, the assessee is liable to pay the tax on the income which he has actually received, and certainly he cannot be made to pay the tax on the income which he has not received or is not entitled to recover in future. In view of this and in view of the facts and circumstances of the case, we are of the opinion that rule 115(c) which was in existence at the relevant time is beyond the scope of section 4 read with section 28 of the Income-tax Act, 1961. Therefore, if the impugned order passed by the first respondent is allowed, then, it will amount to allowing rule 115(c) to impose tax on the petitioners on the income which they have not received or which they are not entitled to receive in future, and that is not contemplated by the substantive provisions of the statute.
18. Mr. Kakodkar, learned counsel appearing on behalf of the petitioners, has also relief upon a decision of the Supreme Court in the case of Bimal Chandra Banerjee v. State of Madhya Pradesh [1971] 81 ITR 105, wherein it is observed by the Supreme Court that no tax can be imposed by any bye-law or rule or by regulation unless the statute under which the subordinate legislation is made specially authorises the imposition, even if it is assumed that the power to tax can be delegated to the executive. The basis of the statutory power conferred by the statute cannot be transgressed by the rule-making authority. A rule-making authority has no plenary power; it has to act within the limits of the power granted to it.
19. Mr. Dias, learned Advocated-General appearing on behalf of the respondents, strongly contended that rule 115(c) which was in existence at the relevant time does not impose any new tax. According to him, the said rule only gives guidelines as to how the foregin exchange received by the petitioners during the relevant period is to be converted into Indian currency. It was further contended by learned Advocate-General that the said rule is framed under Act from the point of view of convenience as it is very difficult for the Assessing Officer to follow different rates of foreign exchange of different countries at different time and, in order to avoid this exercise, it is contended by learned Advocate-General that the said rule has fixed the modality as to how the foreign exchange earned by the assessee during the assessment year is to be converted and taxed, i.e., on the last date which is June 30, 1983, in the present case. The reasons given by learned Advocate-General are definitely very attractive at first glance. However, as pointed out earlier, if the said rule is applied to the fact and circumstance of the present case, virtually it would amount to compelling the petitioners to pay tax on income which they have not earned and will never earn in future. It was further contended by learned Advocate-General that, in fact, there is no obligation on the part of the petitioners to convert the foreign exchange on the date on which they receive and that being so, the petitioners could have converted their foreign exchange into Indian currency on the last day of the previous accounting year, i.e., on June 30, 1983. In our opinion, though there is no obligation under the Income-tax Act or the Rules framed thereunder compelling the petitioners to convert their foreign exchange into Indian currency, as alleged by the respondents, there is also no prohibition on the petitioners as to at what point of time they should not obtain the receipts of the amounts due to them. On the contrary we are of the opinion that if any such blanket compulsion is put, the same would be violative or article 19 of the Constitution of India and, therefore, according to us, there is no substance in the contentions of learned Advocate-General.
20. On the other hand, Mr. Kakodkar contended that, in fact, under the law, more particularly as decided by the Supreme Court in the case of CIT v. Bangalore Transport Co. Ltd. [1967] 66 ITR 373, there is a compulsion on the part of the petitioners to receive the amounts due to them against the receipts of foreign exchange.
21. Mr. Dias, the learned Advocate-General appearing on behalf of the respondents, further relied upon a decision of the Madras High Court in the case S. M. Syed Mohsin v. CIT [1979] 119 ITR 826 and contended that, in the aforesaid case, the applicability of rule 115 of the Income-tax Rules, 1962, was challenged for converting Ceylon currency into Indian currency and the Madras High Court had rejected the arguments advanced by the petitioners. In the said case, the assessee, an individual, had income in India as well as in Ceylon. While accepting the return for the assessment year 1969-70, the Income-tax Officer converted the Ceylon rupees into Indian currency by adopting the official exchange rate of 1 Ceylon rupee as equivalent to 1.2658 Indian rupees. The income so earned in Ceylon in the relevant year was Rs. 10,311 and the converted amount came to Rs. 13,051. Similarly, for the assessment year 1970-71, the Ceylon income was 10,782 and, after converting into Indian rupees, the amount came to Rs. 13,648, and the assessee was charged/taxed accordingly. Against the said assessment, the assessee preferred an appeal and the decision given by the lower authority was confirmed by the Tribunal. Against the said decision, the assessee filed a tax reference and it was mainly contended on behalf of the assessee that rule 115(b)(1)(ii) of the Income-tax Rules, 1962, was applicable only to the income earned either in the country with sterling currency or in a country with a dollar currency. According to the assessee in that case, since the rate of conversion from Ceylon currency to Indian currency was not mentioned in the said rule 115, the same did not apply in his case. In the said facts and circumstances, the Madras High Court had held that the rule-making authority was interested in providing for the rate of conversion with reference to income earned in the particular currencies. There is also no particular reason as to why the rule-making authority should have singled out the sterling and dollar currency for the purpose of rule-making and leave out the other currencies. From the aforesaid facts of the case as decided by the Madras High Court, it is clear that the only argument advanced by the assessee in that case was that rule 115 as it stood then was not applicable to him as, in the said rule, the rate of conversion from Ceylon currency to Indian currency was not mentioned as has been done in the case of sterling and dollar. The argument advanced in the present case is altogether different, i.e., by applying rule 115(c), the petitioners will be required to pay tax on the income which they have not earned and which they will never earn or realise. Therefore, in our opinion, the ratio given in the above case does not support that argument advanced by the learned Advocate-General.
22. Mr. Kakodakr, learned counsel appearing on behalf of the petitioners, further contended that in fact the ratio as laid down by the aforesaid Madras High Court S. M. Syed Mohsin v. CIT [1979] 119 ITR 826, supports the contention of the petitioners that, independent of rule 115, as per the scheme of the Income-tax act, the tax is due to the income-tax authorities as and when income is received by the assessee, and that being so, if the said rule provides otherwise, to that extent, the said rule is bad in law Mr. Kakodkar has also relied on the ratio of the aforesaid case that the rate of conversion of foreign exchange into Indian currency is the rate which was preavailing at the time of the actual point of receipt. Mr. Kakodakar has further relied very strongly on the decision in the case of D. A. Graham and N. G. F. Graham v. CIT [1985] 154 ITR 879 (Kar), to reiterate his contention that the rate of conversion is not postponed from the date of receipt to the last date of the previous accounting year. In this particular case, the assessee was a British who was a resident Indian. The assessee had sold on different dates in the United Kingdom certain shares and securities prior to November 19, 1967, and the remaining shares and securities were sold by him but prior to March 31, 1968. Prior to November 18, 1967, the official exchange rate of pound sterling to Indian rupee was 1 : 21. On November 18, 1967, the United Kingdom devalued pound sterling and, therefore, the official exchange rate on and from November 19, 1967, was fixed at 1 : 18. In that year, for the assessee, the previous accounting year ended on March 31, 1968, corresponding to the assessment year 1968-69. It was contended by the assessee in that case that, for the assessment year 1968-69, the capital gains accruing from the sale of shares and securities in U. K. including dividends from U. K. should be computed at the official exchange rate prevailing as on March 31, 1968, and not as on the very dates they were received, arose of accrued either in U. K. or in India. As against this argument, it was contended on behalf of the Income-tax Department that the official exchange rate prevailing as on the dates of receipt of capital gains and dividends should recognised the same fact. In this case, the Karnataka High Court has observed that the assessee in that particular case had realised, on different dates, pound sterling prior to devaluation, i.e., before November 18, 1967, and, therefore, the rate of conversion must only be with reference to the date of actual receipt and cannot normally be anything else. It was further observed in that case that taking any other view of the matter would be somewhat illogical and even divorced from the realities and the factual situation. It was further observed that aggregation of all receipts as on the last day of accounting year does not create any incongruity or antithesis in the chargeability of the receipt. What really happens is the postponement of the accounting, chargeability and determination and quantification of the liability to tax due thereon with reference to that and other receipts. If this is the true position of receipts, then, it must necessarily follow that the official exchange rates prevailing with reference to those receipts must inevitably be the basis in computing the chargeability to taxes under the Act. While deciding the aforesaid case, the Karnataka High Court has also relied upon the observations made in the case of CIT v. Banglore Transport Co. Ltd. . We also concur with the observations made by the Karnataka High Court in the aforesaid case and come to the conclusion that the rate of conversion from one currency to another should be at the rate prevailing on the last date of the previous accounting year which is June 30, 1983, in the present case.
23. Mr. Kakodkar, learned counsel appearing on behalf of the petitioners, has also relied upon the amendment to rule 115 of the Income-tax Rules, 1962, which came into effect from April 1, 1990, wherein sub-rule (2) is added as under :
"Nothing contained in sub-rule (1) shall apply in respect of income referred to in clause (c) of the Explanation to sub-rule (1) where such income is received in, or brought into, India by the assessee or on his behalf before the specified date in accordance with the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973)."
24. By referring to the aforesaid sub-rule (2), it was contended on behalf of the petitioners that nothing contained in sub-rule (1) shall apply in respect of income referred to in clause (c) of the Explanation to sub-rule (1) where such income is received in or brought into India by the assessee or on behalf of the assessee before the specified date in accordance with the provisions of the FERA 1973. It was contended on behalf of the petitioners have received this amount as per the FERA, 1973, and the said amount was received before the specified date, i.e., June 30, 1983. According to Mr. Kakodakar, the aforesaid amendment is declaratory in nature and, therefore, the same is applicable retrospectively. Mr. Dias, the learned Advocate-General on behalf of the respondents, on the other hand, submitted that the said amendment is not declaratory in nature and there is nothing in the amendment to show that the same is retrospective in application. It is an admitted position that, if the aforesaid amendment is made applicable retrospectively, then, in that event, rule 115(c) of the Income-tax Rules, 1962, will not be applicable. At this point of time, we may further point out that the learned Advocate General also had contended that the said amendment is applicable provided the petitioners have complied with the FERA 1973 and not otherwise. He has further contended that the petitioners must show that they received the aforesaid foreign exchange under section 18 of the FERA, 1973. However, according to our opinion, the petitioners have clearly stated that all the receipts which they have received during the relevant period were as per the FERA, 1973, and to which there is no challenge by the other side. However, we are not dealing with the controversy as to whether the aforesaid amendment which was brought into force on April 1, 1990, is retrospective or prospective as, on the first point itself, we have already arrived at a conclusion that clause (c) of rule 115 of the Income-tax Rules, 1962, is illegal as the same overrides the substantive provisions of the Act.
25. In vies of the aforesaid findings of ours, we quash the order dated March 30, 1989, passed by respondent No. 1 and make the rule absolute in terms of prayer clauses (a) and (b) and allow this writ petition with no order as to costs.