Law:

Section:

Section 28(i) of the Income-tax Act, 1961 - Business loss/deductions - Allowability of - Assessee was one of several branches of a company having its head office in USA -Assessee was required to pay to head office in us dollars its share of administrative and overhead expenses incurred by head office - Such liability of assessee had been considered by ITO year after year to be allowable revenue expenditure, but assessee had not been able to remit to head office this amount because reserve bank's permission therefor had not been obtained and assessee was using said amount as its working capital - In between, on 6-6-1966 Indian rupee was devalued and consequently assessee's liability on said account was increased by certain amount - Whether said increased liability could be allowed as trading loss in assessment year 1967-68 - Held, on facts, yes Facts A company I, having its head office in USA, had its branches all over the world including one in India, which was the assessee here. The assessee was required to pay the head office in US dollars its share of 'administrative and overhead expenses' incurred by the head office. The liability to pay its share of administrative and overhead expenses to the head office had been considered by the ITO year after year to be allowable revenue expenditure. Although this allowance had been granted from year to year, the assessee had not been able to remit to the head office the amounts due on this account for the Reserve Bank's permission therefor had not been obtained. This was because the assessee's income-tax assessments were not completed. On 6-6-1966, the Indian rupee was devalued and, therefore, the liability of the assessee to the head office in terms of the Indian rupee in respect of the unremitted administrative and overhead expenses increased by certain amount. In the assessment year 1967-68, the assessee claimed the said increased amount as an admissible deduction being a loss arising on account of devaluation. The ITO rejected the assessee's claim. On appeal, the AAC, however, allowed the assessee's claim. On appeal before the Tribunal, the revenue contended that the unremitted head office expenses represented…

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