Law:

Section:

I. Section 2(47) of the Income-tax Act, 1961 - Capital gain - Transfer - Assessment year 1993-94 Mere cancellation of a foreign exchange contract does not result in any transfer of any asset, even if extended definition under section 2(47 ) is made applicable [In favour of assessee] Where the question for consideration was as to whether sum received by the assessee upon cancellation of forward foreign exchange contract entered into for discharging borrowing for machinery, was a capital receipt not liable to capital gains tax: Held that, mere cancellation of a foreign exchange contract does not result in any transfer of any asset, even if the extended definition under section 2(47) is made applicable. Hence, the surplus received on cancellation of forward foreign exchange contract was a capital receipt not liable to tax. II. Section 4 of the Income-tax Act, 1961 - Income - Chargeable as - Assessment year 1993-94 Sum received by assessee upon cancellation of forward foreign exchange contract entered into for discharging borrowing for machinery, was a capital receipt [In favour of assessee] Where the Tribunal held that sum received by the assessee upon cancellation of forward foreign exchange contract entered into for discharging borrowing for machinery was a capital receipt. Held that, the assessee-company had entered into contract covering the foreign exchange components to guard against the fluctuation in the rate of the foreign currency. The foreign exchange acquired under the contract was for the purpose of discharging an obligation on capital account, i.e., for borrowing for the purpose of importing capital asset by entering into the foreign exchange forward contract. The assessee-company was merely wishing to freeze its capital liability to discharge debts/borrowing in foreign exchange. The finding by the Tribunal was that the foreign exchange was acquired under the contract for the purpose of discharging an obligation on capital account, viz., towards borrowing for the purpose of import of capital assets, which would indicate that the surplus realised on cancellation of such contract would bear the same characteristic. Hence, the surplus received by the…

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