TMI Blog1985 (1) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... ident company incorporated in the USA. It is a fully owned subsidiary of another company Dorr-Oliver Inc., which is also a non-resident company incorporated in the USA. The operations of the assessee-company are confined to India only, carried on through its only branch at Bombay. Till the assessment year 1966-67, the company filed its statements of final accounts in dollars. For the purposes of the assessment under appeal, for the first time, the company filed one set of statement of final accounts from 1-10-1965 to 30-9-1966 in rupee currency in respect of the Bombay branch and another set of statement and final accounts for the same period in dollars in respect of Stanford (USA) office. The ITO observed that the assessee before him was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the net income as per the accounts and converted it into rupees at the post-devaluation rate as on 30-9-1966. 4. This action of the ITO was challenged before the Commissioner (Appeals) and it was urged that the Supreme Court's decision actually supports the assessee's case. It was urged that the actual receipt of the engineering fee and commission of $ 29,450 was the income received prior to 6-6-1966. It was urged that the accrual of income preceded the receipt of income. Thus, it was urged that income on the receipts up to 5-6-1966 had accrued already on that date. The Commissioner (Appeals) accepted the contention that income accrued prior to the receipt and since out of the income returned by the company $ 14,905 had actually been rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceive the share of profits of the firm arose only on the settlement of accounts, i.e., at the end of the accounting year. The question to be decided by us here is whether in case of income of the non-resident company, which is maintaining its accounts in dollars and which has not made its accounts on 5-6-1966 on account of devaluation of Indian rupee on 5-6-1966, such income should be, pro rata, taken up to 6-6-1966 and converted into Indian rupees at the then prevailing rate of exchange of Rs. 4.762 per dollar and only the income earned after 6-6-1966 is to be converted at the rate of exchange of Rs. 7.5 per dollar. 7. It is to be borne in mind that although profit or loss of business is embedded in each transaction, which a firm, compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at various cases have arisen before the Tribunal, in which capital gains had to be taxed in the hands of the non-residents on the sale of Indian shares. The stock argument advanced and which found acceptance with the Tribunal in those cases, was that the assessee was a non-resident and kept its accounts in dollars, it paid the price of shares in dollars and received the sale price in dollars so that its profit on the date of sale should be computed in dollars and then converted into Indian rupees. The result is that if both the purchase price and the sale price had been taken in rupees, the capital gains tax would have been in lakhs of rupees, but the same were reduced to a nominal figure as a result of devaluation of the Indian rupees, bec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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