| Case ID |
38409722-73a2-41bd-a5b3-78344fb340fe |
| Body |
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| Case Number |
IT REF. No. 472 OF 1974 |
| Decision Date |
Sep 18, 1978 |
| Hearing Date |
|
| Decision |
The Calcutta High Court ruled that the excess amount of Rs. 2,83,614, arising from the devaluation of the Indian rupee and related to the interest-free loan taken by Bestobell (India) Ltd., was not deductible in computing the taxable income. The court held that the increase in liability due to devaluation was of a capital nature and therefore could not be claimed as a business expenditure. The decision reinforced the distinction between capital losses and revenue losses, concluding that the loss did not arise from the ordinary course of business activities but rather from an act of the state (devaluation). |
| Summary |
The case of Bestobell (India) Ltd vs. Commissioner of Income Tax revolves around the issue of tax deductibility of losses arising from the devaluation of the Indian rupee, related to an interest-free loan obtained by the petitioner to finance a government contract. The High Court examined whether the increased liability due to currency devaluation could be classified as a deductible business expense or a capital loss. The court ultimately held that the additional amount payable was a capital loss and not deductible under Section 37(1) of the Income-tax Act, 1961. This judgment is significant in the context of business financing and tax obligations, highlighting the importance of distinguishing between capital and revenue expenditures in tax law. The case references several precedents and emphasizes the mercantile system of accounting in determining tax liabilities. It serves as a critical reference for businesses dealing with foreign currency loans and the implications of currency fluctuations on taxation. |
| Court |
Calcutta High Court
|
| Entities Involved |
Commissioner of Income Tax,
Bestobell (India) Ltd
|
| Judges |
Dipak Kumar Sen,
Bimal Chandra Basak
|
| Lawyers |
Kalyan Roy,
R.N. Dutt,
Suhas Sen,
Samer Banerjee
|
| Petitioners |
Bestobell (India) Ltd
|
| Respondents |
Commissioner of Income Tax
|
| Citations |
1979 SLD 977,
(1979) 117 ITR 789
|
| Other Citations |
Davis v. Shell Company of China Ltd. 32 TC 133,
K.M.S. Lakshmanier & Sons v. CIT [1953] 23 ITR 202 (SC),
Punjab Distilling Industries Ltd. v. CIT [1959] 35 ITR 519 (SC),
India Cements Ltd. v. CIT [1966] 60 ITR 52 (SC),
Edward Collins & Sons Ltd. v. CIR 12 TC 773,
Whimster & Co. v. CIR 12 TC 813
|
| Laws Involved |
Income-tax Act, 1961
|
| Sections |
37(1)
|