TMI Blog1989 (3) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... is the assessment year 1974-75, for which the relevant accounting period is the year ended on December 25, 1973. The facts of the case, as found by the Tribunal, are stated as under : The General Reserve as on the first day of the relevant previous year included a sum of Rs. 9,21,238 which was credited to the General Reserve in the year 1971. The assessee had, earlier, taken a dollar loan from the export-import Bank, Washington, and purchased plant and machinery for its "Chemex" unit. The loan was being repaid with interest on deferred payment basis in instalments. In 1971, the dollar was devalued and the assessee gained a sum of Rs. 9,21,238 on account of it. In its accounts for that year, the assessee had reduced its loan liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, undoubtedly, derived exchange gain as a result of devaluation of the dollar. This gain was not allowed as a deduction of the dollar (sic). This gain was not allowed as a deduction in computing the taxable profits. It is true that this gain related to the plant and machinery account and should have been credited to that account, but the assessee, instead, credited the said amount to the general reserve account. This act, on the part of the assessee, in our view, does not alter the position and we fail to see how the said exchange gain could be reduced from the general reserve account. The exchange gain has not been allowed as deduction in computing the income of the company and, therefore, no benefit has been received by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing for the Revenue, has not been able to give any clear reason. He was also not very clear as to how this amount should have been shown in the accounts. Moreover, it is not a question of accountancy practice. The assessee had taken dollar loans to purchase plant and machinery. The loans had to be repaid with interest. Because of devaluation of the dollar in 1971, the assessee was a gainer by a sum of Rs. 9,21,238. This gain arose because the assessee had to pay less in rupee term for repayment of the loan. The fortuitous event of devaluation reduced the assessee's liability on capital account. The profit made by the assessee was on capital account. The assessee did not make any capital gain by transfer of any capital asset. Therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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