TMI Blog2012 (10) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... ve accrued. Without legally enforceable right there can be no accrual of income, thus as assessee has no lawful right to the receipt in question nor has it claimed such a right in such circumstances, the receipt will not assume the character of income in the hands of the assessee - decided in favour of assessee. - ITA NO. 6115/MUM/11 - - - Dated:- 31-7-2012 - SHRI I.P.BANSAL SHRI N.K.BILLAIYA, JJ. Appellant by : Shri B.S.Taraporewala Respondent by : Shri M.Rajan ORDER PER I.P.BANSAL, J.M This is an appeal filed by the assessee. It is directed against the order dated 08/07/2011 of CIT(A)-6, Mumbai, for the assessment year 2007-08. The grounds of appeal raised by the assessee read as under: These grounds are independent and without prejudice to one another. 1. Loss on exchange - Rs 2,21,000/- The Commissioner of Income Tax (Appeals) 6, Mumbai [CIT(A)] has erred in not allowing deduction of Rs.2,21,000/- being the loss for Assessment Year 2007-2008 on account of depreciation of Sri Lanka Rupees, held as a current asset by the appellant. 2. Income under Section 115JB - increased by Rs.2,21,000/- being loss on exchange - The CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at Rs. 2,21,000/-. The A.O discarded such claim of the assessee on the ground that the loss is not still crystallized hence, cannot be allowed. On the other hand, Ld. CIT(A) though has upheld the disallowance but for the reason different from the AO. According to Ld. CIT(A) that the amount of the assessee in the bank in Sri Lanka cannot be treated as part of the circulating capital but is capital asset of the assessee. The assessee is aggrieved, hence, in appeal. 2.1 On these facts, it is the case of the assessee that as the shares were held as investment the character of shares was capital asset but the character was changed when the shares were sold and proceeds were placed in the bank and it became current or circulating asset. It is the case of the assessee that assessee is following mercantile system of accounting and as per Accounting Standard -11 (AS-11) assessee records the exchange loss/gain on account of currency depreciation/appreciation in its P L Account; the loss accrued to assessee is not notional loss and it has been crystallized and is on current account, therefore, it is allowable. It is also the case of the assessee that in A.Y 2009-10 there was a foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the said amount to India wherein the asSessee earned profit of Rs. 8,43,432. The Commissioner (Appeals) confirmed the addition made by the Assessing Officer. On appeal: Held, dismissing the appeal on this issue, that the profit earned by the assessee on repatriation of the foreign currency had no connection whatsoever with the capital loss, which arose to the assessee on transfer of shares of the subsidiary. Repatriation of foreign currency to India was an event which was separate and distinct from the event of transfer of shares of the subsidiary company. Under the head Capital gains , the loss of Rs. 1,95,509 had been determined and accepted by the Assessing Officer. With this, the process of determination of income or loss under the head Capital gains had come to an end. The assessee received the sale consideration comprising of 5,59,319 Saudi Riyals which thereafter formed part of the assessee s working capital and was retained abroad and was not immediately repatriated. On the date of repatriation, the exchange rate had undergone a change in the assessee s favour and therefore on repatriation the assessee earned profit of Rs. 8,43,432. This profit was on revenue acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wable. In view of the above discussions ground No.1 of the assessee is allowed. 3. Apropos Ground No.2, in view of decision taken in Ground No.1 in favour of assessee and the case law mentioned in the first ground, it is held that the loss claimed by the assessee on diminution of foreign exchange is not notional loss and cannot be termed to be a provision, therefore, this ground of the assessee is also allowed. 4. Now coming to Ground No.3, the provision for refundable dividend has been considered being unascertained liability as according to Department the assessee does not know how much dividend would be claimed by the persons with respect to shares earlier owned by the assessee. As against that it is the case of the assessee that it received dividend on shares which were sold by it in earlier years but which are not still transferred in the name of its purchasers in the records of the investor company. The assessee is crediting such dividend in sundry creditor account and if the said dividend is not claimed by the rightful owner upto a period of 5 years the same is credited to miscellaneous income and offered to tax. It is the claim of the assessee that liability is ascertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven in the Act, u/s.2(24) is an inclusive definition. Anything which can properly be described as income, is taxable under the Act unless expressly exempted. The expression Income has to be understood in its natural meaning. Its natural meaning embraces any profit or gain, which is actually received. The idea behind providing an inclusive definition in section 2(24) is not to limit it s meaning but to widen its net. The charging section viz., Section-4 of the Act, refers to the charge of income tax being on the total income of the previous year of every person. Section 5 defines scope of total income and it talks of income from whatever source derived which is received or deemed to be received in India or which accrues or arises or is deemed to accrue or arise in India. The income bears its quality as income only if it is received by the Assessee, or it has accrued or has arisen to the Assessee, or at least is fictionally deemed to be received by or is deemed to have accrued or arisen to him. If not in fact received, the Assessee should at least be entitled to receive it. To call something income, without there being an actual receipt, there must atleast be a debt owned by a thir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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