Law: Income Tax Act, 1922

Section: 10(2)(xi),10(1)

(a) Income-tax Act (XI of 1922)---S. 10 (2) (xi)-Assessee company treated as resident in Pakistan owing debts to its Managing Agents in India-Deduction of loss claimed on account of devaluation of Pakistan currency-Not admissible in absence of obligation under which dues were payable in Pakistan currency. The assessee company was treated as resident as its entire income arose in Pakistan. It was keeping the accounts in Indian currency but for the purpose of assessment in Pakistan, the com­pany used to convert the same into Pakistan rupees. Prior to the devaluation of Pakistan rupee, i.e., 31st of July, 1955 the company had liabilities in India which consisted of loans taken from the Indian Managing agents for meeting business expenses, and com­mission due to the said Managing agents. In respect of these out­standing liabilities in India the assessee company claimed deduction of loss on exchange from the income in Pakistan for the purpose of arriving at taxable income. The Income-tax Officer disallowed the claim and, the Appellate Assistant Commissioner and the Appellate Tribunal upheld the order. On reference to the High Court: Held, that the deductions claimed by the assessee company did not fall under any of the. clauses of section 10 (2). The obligation of the assessee companies was to pay its Indian Managing Agents in Indian currency and hence there was no question of meeting that obligation by payment in Pakistani currency. Hence these companies are not entitled to claim any deductions for the alleged loss on exchange. Radio Pictures, Ltd., v. Commissioners of Inland Revenue 22 T C 106 and Bennet v. Underground Electric Railway Co. of London Ltd. (1923) 2 K B 535 distinguished. (b) Income-tax Act (XI of 1922)---- -----S. 10 (2)-Only recognises statutory deductions unlike 'English Act which has scope for appli­cation of general principles-(obiter) The English Act does not contain any express allowance or enumeration, of deductions but only enjoins that in computing profits and gains deductions of certain kinds must not be allowed and therefore outside the prohibited deductions and hence there is a scope for application of general principles and indeed it is…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492