LAWS(CAL)-1992-8-23

COMMISSIONER OF INCOME TAX Vs. UNITED COMMERCIAL BANK

Decided On August 06, 1992
COMMISSIONER OF INCOME-TAX Appellant
V/S
UNITED COMMERCIAL BANK Respondents

JUDGEMENT

(1.) In this reference under Section 256(1) of the Income-tax Act, 1961, made at the instance of the Revenue, the following question has been referred by the Tribunal for the opinion of this court:

(2.) The facts admitted and/or found by the Tribunal are as under : The assessee is a banking company. It held foreign currency balances at its authorised branches. By reason of the devaluation of the Indian rupee on June 6, 1966, a profit of Rs. 1,17,77,286 arose to the assessee-bank. These profits, although initially returned by the asscssee-bank as its income, were later claimed to be exempt as of casual and non-recurring nature within the meaning of Section 10(3) of the said Act. This contention. was not accepted by the Income-tax Officer who held that the mere fact that the Malaysian income-tax authorities had excluded the devaluation profits from taxation did not assist the assessee in India as the income-tax law was different in this country. Applying several decisions of the Supreme Court, the Income-tax Officer proceeded to tax the said sum of Rs. 1,17,77, 286 as business profit earned by the assessee as an authorised dealer in foreign exchange. The aforesaid devaluation profit included an aggregate sum of Rs. 28,56,666 in respect of Kuala Lumpur and Penang branches of the assessee-bank.

(3.) In this reference, we are only concerned with the devaluation profit of Rs. 28,56,666 arising in the Kuala Lumpur and Penang branches. The assessce-bank was assessed in Malaysia on a total income of- Rs. 14,98,034. However, the Malaysian income, which was subjected to tax in India, was Rs. 37,81,160. While completing the original assessment, the Income-tax Officer granted D. I. T. relief under Section 91 on a sum of Rs. 14,98,034 being the lower of the incomes assessed in India and in Malaysia. Subsequently, he invoked the provisions of Section 154 on the ground that the devaluation profit of Rs. 28,56,666 not having been subjected to tax in Malaysia, the doubly taxed income was not Rs. 37,81,160 as was erroneously assumed at the time of the original assessment, but was actually Rs. 9,24,484 (Rs. 37,81,160 minus devaluation profit of Rs. 28,56,666) included therein. The Income-tax Officer took the view that since Rs. 9,24,494 is less than Rs. 14,98,054 as assessed in Malaysia, the D.I.T. relief can only be granted with reference to the said sum of Rs. 9,24,494. According to the Income-tax Officer, it was clearly a mistake apparent from the record.