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2022 (9) TMI 1406 - HC - Income TaxDisallowance of claim of deduction on account of commission on locker rent received in advance - HELD THAT:- In CIT VS. Bank Of Tokyo Limited [1993 (5) TMI 172 - CALCUTTA HIGH COURT] it is held that payability, even though mandatory merely creates a tentative right to receive commission for unexpired period of the guarantee and not a perfected right. The right becomes perfected and crystallised only with the expiry of the unexpired period. The Calcutta High Court has also noted the Authority in E.D.Sassoon & CO. LTD. [1954 (5) TMI 2 - SUPREME COURT] wherein it has held that a debt must have come into existence and the assessee must have acquired a right to receive the payment. Unless and until his contribution or parenthood is effective in bringing into existence a debt or a right to receive the payment or in other words, a debitum in praesenti, solvendum in futuro, it cannot be said that any income has accrued to the assessee. The Bank, no doubt receives the locker rent in advance for future period. The said amount can be appropriated for the relevant future years when service is provided. The ITAT, in our view has rightly applied the ratio in Bank of Tokyo Limited and held that no addition was warranted in respect of the locker rent received in advance. Accordingly, we answer this question against the revenue and in favour of the assessee. Protection of foreign exchange fluctuation pertaining to forwards contracts - HELD THAT:- Bank agrees to pay the money in Indian currency equal to the foreign exchange rate by entering into a contract in respect of the fluctuation of the foreign exchange value. In that scenario, the Bank may either gain some money or lose money depending upon the exchange rate as on the date of the conclusion of the contract. In the interregnum period, unrealized gain, if any, is a notional figure recorded in the books of accounts and the same will be subject to the completion of transaction at the end of the contract period. This aspect was considered by the Madras High Court in the case of Indian Overseas Bank [1990 (2) TMI 43 - MADRAS HIGH COURT] - The Madras High Court following the authority in CIT Vs. Shoorji Vallabhdas and Co.[1962 (3) TMI 6 - SUPREME COURT] has held that there cannot be a tax, even though for the purposes of book-keeping, an entry is made about hypothetical income. It is possible that at the end of the contract, the Bank may infact gain or lose money based on the foreign exchange value as on the date of the conclusion of the transaction. We are in respectful agreement with the view taken by the Madras High Court, which the ITAT has considered and accepted. Hence, this question is also answered in favour of the assessee and against the revenue.
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