Law:

Section:

Section 2(47) of the Income-tax Act, 1961 - Transfer - During relevant assessment year assessee transferred certain sum from its account held in a London bank to its account in a bank in India - Consequent on fall of exchange rate of pound vis-a-vis Indian rupee, assessee incurred loss occasioned by exchange of currencies upon remittance - Whether said exchange of currencies could not be considered as 'exchange' within meaning of section 2(47) - Held, yes Section 57(iii) of the Income-tax Act, 1961 - Income from other sources - Deduction - Whether on facts under head 'Transfer' when assessee had not been able to show that loss due to devaluation was an expenditure laid out or expended wholly or exclusively for purpose of making or earning income, that loss could not fall under section 57(iii) - Held, yes Words and phrases - Word 'exchange' occurring in section 2(47) of the Income-tax Act, 1961 Facts The assessee during the relevant assessment year transferred certain sum from its account held in London bank to its account in a bank in India. Consequent upon the fall of the exchange rate of pound vis-a-vis Indian rupee, the assessee incurred loss occasioned by the exchange of currencies upon remittance in India. The assessee also claimed that the amount lying in bank in London was a capital asset and the loss occurred due to exchange of currencies upon remittance should be considered as a loss within the meaning of section 2(47) and in the alternate the loss should be allowed as a deduction against the income from the head 'Income from other sources'. The Tribunal rejected the assessee's claim. On reference: Held The 'transfer' contemplated under section 2(47) envisages, no doubt, sale exchange or relinquishment of the asset, etc. But mere conversion of one currency into another currency cannot be considered as 'exchange'. The exchange in the context must mean transfer of one capital asset from another capital asset. Like a sale it requires two persons. There cannot be a sale to oneself. So too in the case of exchange. In the present case, the ownership of the money remained with] the assessee even after the exchange in the first place. Secondly, it was just a…

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