Law: Income Tax Act, 1961

Section: 264

(a) Income-tax----Business loss-Non-resident-Business carried on in country with head office in London-Accounts in country maintained in local currency-Accounts of business of assessee in country maintained in head office in London recorded in pound sterling-On the basis of accounts in the head office of assessee in London tax was assessed in country-Income from business accrued and assessed in country - Devaluation of local currency-Loss due to devaluation not permissible as trading loss. Chainrup Sarnparram v. C.I. T. (1953) 24 I T R 481 (S C) and Sutlej Cotton Mills Ltd. v. C. I. T. (1979) 116 I T R 1 (S C) ref. (b) Res judicata- ---- Decision of I. T. O. or Tribunal in regard to a particular year-Does not operate as res judicata for subsequent year. C.I.T. s. L. G. Rantammurthi (1977) 24 I T R 453 (Mad.) distinguished. JUDGMENT M. M. Dutt, J.-The applicant, Namdang Tea Co. Ltd., has challenged the propriety of the judgment of Sabyasachi Mukharji J., whereby the learned Judge discharged the rule nisi issued on the application of the appellant under Art. 226 of the Constitution. The appellant is a non-resident sterling company which at all material times, was carrying on business of growing, manufacturing and selling tea. The tea gardens and factories of the appellant were all in India. The accounts in India were recorded in rupee currency. The main accounts at the head office of the appellant in London were recorded in sterling. It is alleged that on the basis of these accounts in the head office of the appellant which was closed on 31st December, every year, the assessments of income­ tax were made in India. A current account was maintained between the London head office and the Indian division in respect of the appellant's trading transactions. On June 6, 1966, Government of India devalued the rupee in terms of the pound sterling. It is alleged that as a result of the said devaluation of the rupee, the sterling value of the appellant's trading assets and liabilities in India as reflected in its London accounts suffered a reduction of £54,897 which represented loss or the appellant's net current assets, as distinguished from its capital or fixed assets. The…

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