Law:

Section:

Section 28(i) of the Income-tax Act, 1961 [Corresponding to section 10(1) of the Indian Income-tax Act, 1922] - Business loss - Allowable as - Assessment year 1955-56 - Assessee-company, which was carrying on business of film production in India, had a distribution centre in Pakistan - Assessee's accounts were maintained on mercantile system of accounting and profits earned through Pakistan Centre used to be shown in Indian books after converting from Pakistani currency into Indian currency at then prevailing rates - For relevant assessment-year, amount earned as profits had been assessed and tax was paid on it but said profits were continued to remain in Pakistan - Subsequently, devaluation in Pakistan currency took place and as a result, amount received by assessee became less - Whether amount lying at Pakistan Centre could only be said to be capital asset of assessee and, therefore, loss incurred on devaluation of Pakistan currency was not allowable business loss - Held, yes Section 36(1)(vii) of the Income-tax Act, 1961 [Corresponding to section 10(2)(xi) of the Indian Income-tax Act, 1922] - Bad debts - Whether in view of facts stated under head "Business loss - Allowable as", loss incurred to assessee on account of devaluation of foreign currency was an allowable bad debt - Held, no FACTS The assessee company carried on the business of film production in India and earned profits by distributing the films for exhibition in different parts of India and Pakistan. The assessee had a distribution centre in Pakistan. The accounts used to be shown in the Indian books after converting from Pakistani currency into Indian currency at the then prevailing rate of exchange. During the accounting year relevant to assessment year 1955-56, the Government of Pakistan devalued its currency with the result that the amount which the assessee was to receive in India in terms of Indian rupees was less. In terms of Indian rupees after the devaluation of the Pakistani currency, the amount came to Rs. 2,04,955 and the assessee accordingly revalued it in its books in India. The difference between the amount as expressed in Indian currency before and after the devaluation was the…

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