Oil & Natural Gas Commission vs Additional Commissioner Of Income Tax on 24 August, 1998
Bestobell (India) Ltd. vs. CIT (1979) 117 ITR 789 (Cal) applied in part. 11
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1 - 10 of 30 (2.58 seconds)Deputy Commissioner Of Income-Tax, ... vs Maruti Udyog Ltd. on 17 February, 2006
15. With respect to the stand of the Revenue that the additional liability on account of exchange fluctuation is in the nature of capital loss by relying on the case of Bestobell (India) Ltd. v. CIT , the Id. Counsel also submitted that the said decision cannot help the case of the revenue in view of the subsequent decision of the Supreme Court in the case of Sutlej Cotton Mills Ltd. v. CIT .
Oil India Co. Ltd. vs Commissioner Of Income-Tax, ... on 17 December, 1980
13. We will first deal with question No. 1 of the assessee's application. It appears to us that the contentions on this point are covered by the ratio of the decision, viz., whether the amount of Rs. 52,17,340 could be deducted from the assessee's income in view of the principles, on this aspect, decided by this court in the case of Bestobell (India) Ltd. v. CIT [1979] 117 ITR 789. It has to be borne in mind that the Tribunal based its decision in disallowing this claim of the assessee on the Tribunal's own decision in the aforesaid case which ultimately came up before this court, as referred to hereinbefore.
Commissioner Of Income-Tax, ... vs Oil India Ltd. on 30 March, 1982
12. The point was also gone into at length in the case of Bestobell (India) Ltd. v. CIT , where it was held that since the assessee maintained its accounts on mercantile basis, on the devaluation of the Indian currency the liability of the assessee to its foreign creditor immediately increased to the extent of rupees devalued and the assessee became liable to pay and/or spend an extra amount in rupees in order to pay its dues. The liability of the assessee arose during the assessment year and could not be said to be a contingent liability or an anticipated future loss.
Commissioner Of Income-Tax vs Renusagar Power Co. Ltd. on 9 December, 1997
13. There are a number of decisions of different High Courts also wherein a similar controversy has been dealt with. Reference may be made to the decisions in Bestobell (India) Ltd. v. CIT [1979] 117 ITR 789 (Cal) ; Union Carbide India Ltd. v. CIT [1981] 130 ITR 351 (Cal); Acropolymers (P.)
Commissioner Of Income Tax vs Renusagar Power Co. Ltd., Mirzapur on 9 December, 1997
13. There are a number of decisions of different High Courts also wherein similar controversy has been dealt with. Reference may be made to the decisions in Bestobell (India) Ltd. v. CIT (1979) 117 ITR 789 (Cal), Union Carbide India Ltd. v. CIT (1981) 130 ITR 351 (Cal), Acropolymers (P) Ltd. v. CIT (1985) 151 ITR 158 (P&H), CIT v. Calcutta Electric Supply Corporation Ltd., (1987) 166 ITR 797 (Cal), CIT v. Cochin Refineries Ltd. (1988) 173 ITR 461 (Ker), Stumpp and Scheule GMBH v. CIT (1986) 160 ITR 581 (Karn) and CIT v. V.S. Dempo & Co. Pvt., (1994) 206 ITR 291 (Bom). In all these cases the view that has appealed to us, has been expressed.
Commissioner Of Income-Tax vs Bharat General And Textile Industries ... on 4 April, 1985
24. This court held that "in view of the consistent view of the Supreme Court and in view of the decision in Bestobell (India) Limited" , the increased liability in terms of rupees for repayment of loan was not an allowable deduction as the said loss was on capital account. Thus whether there is devaluation or whether there is fluctuation in the rate of exchange, the fact remains that the exchange rate goes against the assessee resulting in increase in the liability and there cannot be any difference in principle in deciding the question. In Union Carbide India Ltd. , the alternative argument of the assessee that development rebate should have been allowed on the increased liability arising out of devaluation attributable to plant and machinery was accepted. Even the observation of this court in that context also does not support the contention of Mr. Bajoria. The principle which has been laid down in Union Carbide India. Ltd. , by this court is that if the contract stipulates repayment in foreign currency, the actual cost of the asset must be computed on the value of the foreign currency. Anything which went into the repayment was part of the actual cost of the capital asset. Thus in the instant case also the extra expenditure incurred by the assessee would be towards the cost of plant and machinery and accordingly it will be on capital account. In either view of the matter, the contention of Mr. Bajoria must fail. We, therefore, answer the first question by saying that the additional expenditure incurred by reason of exchange fluctuation was capital expenditure.
Union Carbide India Ltd. vs Commissioner Of Income-Tax on 28 April, 1980
16. Perhaps, in this light, the Division Bench of this court decided this question in the case of Bestobell (India) Ltd. v. CIT . There, what happened was that the assessee, an Indian subsidiary of a nonresident company incorporated in the United Kingdom, was engaged in executing a contract awarded by a Govt. of India undertaking. In executing the said contract, the funds of the assessee to the extent of over Rs. 24 lakhs became blocked. The assessee, therefore, approached its parent company for a loan of 37,500, being about Rs. 5 lakhs in Indian currency at that time. The foreign principal company agreed to advance the amount to the assessee and the assessoe by its letter dated January 18, 1965, sought the approval of the Reserve Bank of India for the loan of Rs. 5 lakhs ( 37,500) from the parent company with permission to repatriate the amount when required after one year or earlier if funds would become available. The permission was granted by the Reserve Bank for the loan
and the assessee received the loan on February 25, 1965. The loan was not repaid at the expiry of one year and remained outstanding in the books of the assessee up to 6th June, 1966, on which date the Indian rupee was devalued. As a result of the devaluation, the assessee had to arrange for a sum of Rs. 7,87,692 to repay the original loan of 37,500, and, consequently, an extra amount of Rs. 2,87,692 was necessary to repay the original loan of Rs. 5 lakhs. After deducting a gain of about Rs. 4,078 on the assessee's sterling deposit in the London bank, the assessee debited its profit and loss account with a sum of Rs. 2,83,614 for the assessment year 1967-68, and claimed deduction of this amount. The ITO rejected the claim of the assessee on the ground that the increase of liability arising from devaluation on account of sterling loan was of a capital nature and could not be allowed as a revenue expense. On appeal, the AAC also held that the loss on account of devaluation in connection with a loan could not, under any circumstances, be considered to be revenue loss, that accretion in the amount of the borrowing was not admissible as a deduction, that the assessee not being a dealer in foreign exchange, the loss was not incidental to its business or in carrying on the same, and confirmed the disallowance of the loss. On further appeal to the Tribunal, the assessee contended that the amount should be allowed as business expenditure under Section 37(1) of the, I.T. Act, 1961, as a loss incidental to the business, that although the loan had not been repaid during the relevant year, as the assessee's accounts were kept on the mercantile system, the liability having arisen in the relevant year by reason of the devaluation, it was in the nature of an expenditure incurred by the assessee and allowable under Section 37, that the expenditure for the purpose of business included the payment of the assessee's statutory dues and taxes and that the loan had been taken by the assessee for the purpose of its business and the loss occasioned by devaluation was suffered in the business. It was held by this court that the contention of the revenue that notionally the expenditure, if any, incurred by any loss accruing to the assessee by reason of the devaluation did not arise in the year of assessment could not be accepted. The assessee maintained its accounts on mercantile basis. On devaluation of the Indian currency, the liability of the assessee immediately increased to the extent the rupee was devalued and the assessee became liable to pay and/or spend an extra amount in the rupee in order to pay its dues. The liability of the assessee arose during the assessment year and could not be said to be a contingent liability or an anticipated future loss. However, the extra expenditure, deemed or otherwise, or the loss, was inextricably connected with the assessee's indebtedness and did not arise de liors the indebtedness. Therefore, the extra amount which the assessee had to provide for as a result of devaluation cannot be considered as extra expenditure to be
incurred for meeting the debt like postal expenses or bank charges or as extra expenditure resulting in a business loss of a revenue nature. If there was a devaluation in favour of the rupee as a result of which the assessee had to pay less to its creditors, the surplus arising would have been of capital nature and could not have been assessed in the hands of the assessee as a business profit. Conversely, as a result of the exchange rate going against the assessee, the loss which the assessee incurred cannot be held to be a revenue loss. In that case, it was not the contention of the assessee that it had incurred the extra expenditure in order to secure the loan. The loan had already been obtained. It was at the point of repayment that the assessee had to provide an extra amount in rupees by reason of the devaluation. Hence, it was not expenditure incurred for securing the use of money for a certain period which could be treated as revenue expenditure. Therefore, the Tribunal was right in holding that the amount of Rs. 2,83,614 was not deductible in computing the assessee's profits and gains of business. There the Tribunal was also right in holding that the amount of Rs. 2,83,614 was not deductible in computing the chargeable profits for the purposes of the surtax assessment for the assessment year 1967-68. There the two questions with which the court was concerned were as follows ;
Commissioner Of Income-Tax vs Calcutta Electric Supply Corporation ... on 8 September, 1986
13. The controversy raised in question No. 5, in our view, is covered by a decision of a Division Bench of this court in the case of Bestobell (India) Ltd. v. CIT [1979] 117 ITR 789. The facts in that case are more or less identical to the facts before us. In that case, as a result of devaluation, the assessee had to incur an extra expenditure to repay a loan. It was held that the extra expenditure was not incurred for the purpose of securing the loan and that the same was inextricably connected with the assessee's indebtedness. It was held further that the said extra expenditure was not an expenditure of a revenue nature but was of a capital nature.
Commissioner Of Income-Tax vs International Combustion (I.) Pvt. ... on 24 March, 1982
10. The counsel for revenue placed strong reliance on the cases of Bestobell (India) Ltd. v. CIT , Union Carbide India Ltd. v. CIT and the judgment of the Supreme Court in the case of Sutlej Cotton Mills Ltd. v. CIT and contended that the outstanding liability on the date of the devaluation appearing in the books of account of the assessee was a loan or a deposit and appreciation of that liability would result in a loss of a capital nature. This argument, however, cannot be accepted in view of the clear finding of facts made by the Tribunal. The outstanding liability was on account of purchase of plants and machineries which were stock-in-trade of the assessee's business. There was an appreciation of that liability in the course of business. The business was conducted in foreign exchange and the loss arose directly from the business. The fact that the purchases were made in an earlier accounting year will not make any difference in this case. The liability was and remained a trading liability. In order to discharge that liability, the assessee, after devaluation, had to pay a larger amount in rupees. The additional liability arose not in the accounting year when the purchases of goods were effected but in the accounting year when the devaluation took place.