TMI Blog1996 (1) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... SUHAS C. SEN J.-- Special leave granted. The Commissioner of Income-tax has come up in appeal against the judgment of the Division Bench of the Bombay High Court (see [1992] 195 ITR 810), quashing an order passed by the Commissioner of Income-tax under section 263 on March 30, 1989. The High Court was also of the view that clause (c) of rule 115 of the Income-tax Rules, 1962, was in conflict of the substantive provisions of the Income-tax Act, 1961, and was ultra vires the Act. The controversy in this case is about the taxability of the amounts received by the assessee from foreign buyers during the period July 1, 1982, to June 30, 1983 (assessment year 1984-85). The assessee offered for assessment the amounts received as price of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the foreign exchange at the telegraphic transfer buying rate on the last day of the previous year as required by rule 115, if that is more favourable to the Revenue, and bring the difference to tax. " This order was challenged by the assessee by a writ petition in the Bombay High Court (see [19921 195 ITR 810) in which the vires of rule 115(c) of the Income-tax Rules, 1962, was also questioned. The facts of the case, as recorded in the order of the High Court, are as under (at page 813) : " The petitioners in this case are a company incorporated under the Companies Act, 1956. The petitioners are exporting iron ore to foreign countries, more particularly to Japan. The petitioners entered into agreements for sale of iron ore with forei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the documents of bill of lading are presented by the petitioners through their bankers in India. According to the petitioners, it is at this point of time when the petitioners receive money under the contract that they are liable to be taxed. The petitioners have further stated that, during the previous accounting year from July 1, 1982, to June 30, 1983, the petitioners have received various payments on different dates and the petitioners have paid tax on the actual income they received, from the bank in Indian currency. It is also contended on behalf of the petitioners that, in fact, the petitioners received the money on various dates at the rate of foreign exchange prevailing on the date of receipt of the money. The petitioners have al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 shall be the telegraphic transfer buying rate of such currency as on the specified date. Explanation.-- For the purposes of this rule,-- (1) ' telegraphic transfer buying rate ' shall have the same meaning as in the Explanation to rule 26 ; (2) ' specified date ' means-- (a) in respect of income chargeable under the head ' Salaries ', the last day of the month immediately preceding the month in which the salary is due, or is paid in advance or in arrears ; (b) in respect of income chargeable under the head ' Interest on securities ', the last day of the month immediately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is assessable in respect of any income accruing or arising or deemed to have accrued or arisen in foreign currency or has received or is 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 ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready taken place, then there is no question of converting into rupees any income held in foreign currency. The facts of the case, as stated by the High Court, also make it clear that the assessee from time to time had exported goods. The price was paid by the foreign buyers through an Indian bank. The Indian bank, on behalf of foreign buyers, opened letters of credit. The bills of lading, invoices and other documents were presented by the assessee through their bank to the bank of the foreign buyers. The amounts receivable by the assessee were credited in their account by their bank in rupees. The entire sum received by the assessee was offered for assessment and was duly assessed. We fail to see how the Commissioner of Income-tax came t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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