Law: Income Tax Rules, 1962

Section: 115

(a) Income-tax--- ----Income---Foreign exchange---Rate of exchange---Scope of 8.115, Indian Income Tax' Rules, 1962----Rule 115 does not contravene provisions of Indian Income Tax Act, 1961---Rule 115 is valid---Indian Income Tax Rules, 1962, R. 115--[Chowgule & Co. Ltd. v. C.I.T. (1992) 195 ITR 810 reversed on this point]. Rule 115 of the Indian Income Tax Rules, 1962, merely lays down that "for the calculation of the value in rupees of any income accruing or arising or deemed to accrue or arise to the assessee in foreign currency or received or deemed to be received by him or on his behalf in foreign currency", the rate of exchange shall be the telegraphic transfer buying rate of such currency as on the specified date. Explanation (2) has clarified that the "specified date" will mean in respect of income chargeable under the heading of "profits and gains of business or profession" the last day of the previous year of the assessee. This only means that if an asscssee is assessable in respect of any income accruing or arising or is deemed to have accrued or arisen in foreign currency or has received or deemed to have received income in foreign currency, then such foreign currency shall be converted into rupees notionally at the telegraphic transfer buying rate of such currency as on the last day of the previous year of the assessee,. If on the last day of the previous year, the assessee does not have any foreign currency in his hand or the assessee is not entitled to receive any foreign currency, then there is no question of conversion of such foreign currency into rupees. It is only the foreign currency which will have to be converted into rupees. But, if the foreign currency received by an assessee has been converted into rupees before the specified date, the question of application of rule 115 does not arise. Rule 115 does not lay down that all foreign currencies received by an assessee will be converted into rupees only on the last day of the accounting period. Rule 115 only fixes the rate of conversion of foreign currency. If there is no foreign currency to convert on the last day of accounting period, then no question of invoking rule 115 will arise.…

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