| Case ID |
3949c570-1fe2-40fe-a6f4-5adac96ba18b |
| Body |
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| Case Number |
IT REFERENCE No. 112 OF 1973 |
| Decision Date |
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| Hearing Date |
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| Decision |
The Tribunal held that the payment of royalty had to be determined in French currency and that the liability became final and conclusive only when the remittance was made to the French company. The additional expenditure incurred by the assessee due to the devaluation of the Indian rupee was held to be admissible as business expenditure under section 37(1). The High Court affirmed the Tribunal's decision, stating that the liability for royalty was in French francs, and the claim for deduction was valid as it was incurred in the course of business. |
| Summary |
In the case of Commissioner of Income Tax v. Freyssinet Prestressed Concrete Co. Ltd., the Bombay High Court addressed the admissibility of additional expenditure incurred by the assessee due to the devaluation of the Indian rupee while paying royalties to a French company. The assessee, a limited company, manufactured cone anchorages under a license from the French company, which required royalty payments in French francs. The key legal question centered on whether the additional expenditure incurred due to currency devaluation was deductible as business expenditure under section 37(1) of the Income-tax Act, 1961. The court ruled in favor of the assessee, emphasizing that the liability was determined in French currency, and thus, the additional costs incurred were allowable deductions. This case highlights the importance of understanding currency liabilities in international contracts and their implications for tax deductions. Keywords: income tax, business expenditure, royalty payments, currency devaluation, legal deductions. |
| Court |
Bombay High Court
|
| Entities Involved |
Not available
|
| Judges |
Kania, J
|
| Lawyers |
R.J. Joshi,
S.B. Naik,
S.E. Dastur,
P. Shah
|
| Petitioners |
Commissioner of Income Tax
|
| Respondents |
Freyssinet Prestressed Concrete Co. Ltd.
|
| Citations |
1983 SLD 1242,
(1983) 143 ITR 197
|
| Other Citations |
Narandas Mathuradas & Co. v. CIT [1959] 35 ITR 461 (Bom.)
|
| Laws Involved |
Income-tax Act, 1961
|
| Sections |
37(1)
|