COMMISSIONER OF INCOME TAX Vs. MEHBOOB PRODUCTIONS PVT LIMITED

JUDGEMENT

(1.) THE question stated for our decision at the instance of the Commissioner is :

(2.) THE question arises under the following circumstances :

(3.) AS stated in the question referred we are concerned with a sum of Rs. 95,148, claimed by the assessee as loss in exchange in the profit and loss account. How this amount arose is shown in the accounts of the assessee. In the year of account the assessee had to this credit in Karachi with its the account year 1st October to September 30, 1955, the Government of Pakistan devalued its currency with the result that the amount which the assessee was to receive in India in terms of Indian rupees was less. In terms of Indian rupees after the devaluation of the Pakistani currency, the amount came to Rs. 2,04,955 and the assessee accordingly revalued it in its books in India. The difference between the amount as expressed in Indian currency before and after the devaluation is the amount which the assessee now claims as loss in the year of account and that amount is the sum of Rs. 95,148. The assessee claimed that this amount was a loss which it sustained as a result of the devaluation of the Pakistani currency some time on 31st July, 1955. Prior to the devaluation the income earned by the assessee through its distributors Mehboob Pictures, in Karachi in Pakistani currency was being accounted for in its books of account in India in Indian currency at the official exchange rate, the official exchange rate then being 100 Pakistani rupees equal to 144 Indian rupees, but upon the devaluation by Pakistan the ratio was that 100 Pakistani rupees became equal to 100 Indian rupees.