TMI Blog1981 (7) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... of the import of its stock-in-trade and was thus directly connected with its business, was based on no evidence and/or otherwise perverse ? 2. If the answer to question No. (1) is in the negative whether, on the facts and circumstances of the case and on a correct interpretation of the agreement dated July 28,1960, between Samuel Osborn Co., U.K., and the assessee-company, the Tribunal was justified in holding that the sum of Rs. 21,09,587 represented the assessee's trading liability and was admissible as a deduction in computing its business income for the assessment year 1967-68 ? " It appears that the assessee is a company and is engaged in the business of importing high speed steel, alloy steel, stainless steel and similar othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailing exchange rate. This running account stood as hereunder: -------------------------------------------------------------------------------------------------------------------------------------------------- Year Opening Add imports Less remittances Closing balance during the and credit notes balance on 1st year on 31st August July -------------------------------------------------------------------------------------------------------------------------------------------------- pound sh. d. pound sh. d. pound sh. d. pound sh. d. 1962 ... ... ... 166,299-8-3 1963 166,299-8-3 46,470-17-8 15,282-10-5 197,487-15-6 1964 197,487-15-6 42,626-11-1 32,347-17-5 207,766-9-2 1965 207,766-9-2 92,220-17-4 18,551-18-11 281 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rade. It was thus a trade liability. The case of the department that these amounts had been left by the foreign company with the assessee for its use as capital for developmental and investment purposes is shown to be factually not true. The running account itself belies the case. There is besides the affidavit sworn to on behalf of the assessee, which is not controverted by the department, that there never was any such arrangement or understanding between the assessee and the foreign company permitting the employment of the amount due to the latter in any such manner. True it is that in every year the remittance to the foreign company were less than its import into India and thus the running account had only been steadily swelling in its f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not shown in the accounts of 1967-68 this devaluation loss and that itself was proof enough that it was not its liability, also cannot be accepted. There is the explanation given that it was because everything then was in a fluid state and the matter was under negotiation with the foreign company that the assessee could not decide then what was to be done with regard to the loss. " Then the Tribunal discussed the relevant authorities and observed that the assessee was following the mercantile system of accounting. The devaluation loss arose and accrued in the accounting period relevant to the assessment year 1967-68. Revenue's stand that the loss arose in respect of transactions that took place in earlier years, the accounts of which ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was free to remit the entire amount. The assessee was forced to the circumstances and as a matter of prudent business transaction the creditor company had to allow the assessee to pay in the manner that the assessee did. In these circumstances, the Tribunal came to the conclusion as it did. In our opinion, it could not be said that the Tribunal acted without evidence or the conclusion of the Tribunal was perverse in law. If that is the position, question No. 1 must be answered in the negative and in favour of the assessee. If that again is the position, in view of the terms of the agreement, the Tribunal, in our opinion, has correctly summarised the agreement dated July 28, 1960. In the facts and circumstances of the case, the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X
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