TMI Blog1986 (2) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... in law in coming to the conclusion that the capital gains taxable under section 45 of the Income-tax Act in the hands of the non-resident is Rs. 12,60,000 and not Rs. 7,29,891 ? " 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is wrong in law in coming to the conclusion that the loss arising out of change in the rate of exchange of DM and Rupee between the date of purchase and sale of shares, equivalent to Rs. 5,30,109 is not a capital loss available for set off against capital gains of Rs. 12,60,000 as arrived at by the Department?" The facts as found by the Tribunal leading to the reference are these: M/s. Stumpp Schuele GmbH, the assessee, is a non-resident company. As a part of the colla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revailing as on January 21, 1974 7,29,891 " As against this, the Income-tax Officer worked out the long-term capital gains at Rs. 12,26,000 as follows: Rs. "Sale proceeds in rupees 15,26,000.00 (-)Cost of acquisition 3,00,000.00 ---------------------- Long-term capital gains 12,26,000.00 " ---------------------- The Income-tax Officer accordingly assessed this sum of Rs. 12,26,000 for the assessment year 1974-75. The appeal before the Appellate Assistant Commissioner of Income-tax and the Income-tax Appellate Tribunal having been unsuccessful, the Tribunal has made this reference at the instance of the assessee. We will deal with the questions in the order they are referred to us. Sri G. Sarangan, learned couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... currency. On the other hand, the Indian company allotted in the year 1962 to the assessee 7,500 shares of the face value of Rs. 100 per share. The value of this 7,500 shares allotted in lieu of the machinery supplied is Rs. 7,50,000 in Indian currency. The Indian company again allotted 10,000 bonus shares to the assessee. The assessee thus held 17,500 shares of the Indian company. The acquisition of these shares was in India and its value was in Indian currency. Payments were not made to the assessee for the supply of machinery in foreign currency but in lieu thereof, the assessee was given shares valued in Indian currency. It is not the case of the assessee that the collaboration agreement provided that payments should be made by the India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgeable under the head " Capital gains " will be Rs. 12,26,000 and not Rs. 7,29,891 as claimed by the assessee. Section 4 which is the changing provision provides that income is charged at the rate or rates specified for the year by the Finance Act, on a person on his total income of the previous year computed in accordance with and subject to the provisions of the Act. Section 5 defines total income " and that part of section 5 relevant for our purpose reads: " Section 5. (1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes... " Section 5. (2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ian currency can only be subjected to tax. Rule 115 provides the rate of exchange for conversion into rupees of income expressed in foreign currency. This rule only regularises official exchange rates fixed by the Reserve Bank of India for enabling the conversion of income earned in foreign currency into Indian currency for the relevant period specified therein. That is so, because under the Act computation of income is made in Indian currency. We are supported in this view by a decision of this court in D. A. Graham v. CIT [1985] 154 ITR 879. On the foregoing discussion, we hold that our answer to question No. 1 must be in the affirmative. We now pass on to examine question No. 2. The assessee, being a non-resident, it was argued, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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