M.M. Dutt, J.
1. The applicant, Namdang Tea Co. Ltd., has challenged the propriety of the judgment of Sabyasachi Mukharji J., whereby the learned judge discharged the rule nisi issued on the application of the appellant under Article 226 of the Constitution.
2. The appellant is a non-resident sterling company which, at all material times, was carrying on business of growing, manufacturing and selling tea. The tea gardens and factories of the appellant were all in India. The accounts in India were recorded in rupee currency. The main accounts at the head office of the appellant in London were recorded in sterling. It is alleged that on the basis of these accounts in the head office of the appellant which was closed on 31st December, every year, that assessments of income-tax were made in India. A current account was maintained between the London head office and the Indian division in respect of the appellant's trading transactions.
3. On June 6, 1966, the Govt. of India devalued the rupee in terms of the pound sterling. It is alleged that as a result of the said devaluation of the rupee, the sterling value of the appellant's trading assets and liabilities in India as reflected in its London accounts suffered a reduction of 54,897 which represented loss on the appellant's net current assets, as distinguished from its capital or fixed assets. The appellant's head office profit and loss account for the concerned year ended on 31st December, 1966, accordingly, contained a debit entry of 54,897 in respect of the said loss. The aforesaid loss was treated by the appellant as an allowable charge in the computation of the appellant's income for the relative assessment year 1967-68.
4. But in making the assessment, the ITO, 'E' Ward, Companies District II, Calcutta, the respondent No. 2, disallowed the said claim on the ground that there could not be a presumption that the assessee suffered any loss on the devaluation of the rupee. On appeal by the appellant, the AAC upheld the said view of the ITO on the ground that the assessment in India was concerned with the appellant's income or loss in terms of rupees, and that the loss arising on account of devaluation of the rupee was not a real loss.
5. The appellant filed a revision application to the Commissioner under Section 264 of the I.T. Act, 1961, against the order of the AAC. During the hearing of the said application before the Commissioner, it was submitted on behalf of the appellant that whereas the loss claimed in the assessment year 1967-68 on account of the devaluation of the rupee had been disallowed, the profit arising under similar circumstances on account of devaluation of the pound in the immediately following year, that is, in the year relevant to the assessment year 1968-69, was taxed and included in the appellant's total income. The Commissioner took the view that there were some differences in fact between the two years of assessments. He also relied on the report of the appellant's auditors, Price Waterhouse & Co., Chartered Accountants, to the following effect : 'The loss on devaluation of the Indian rupee does not fall to be taken into account in arriving at profits computed in rupees assessable to Indian taxation.' Accordingly, he rejected the revision application.
6. Being aggrieved by the order of the Commissioner, the appellant moved a writ petition in this court and obtained a rule nisi out of which this appeal arises. The learned judge, after considering the facts and circumstances of the case and the submissions made on behalf of either party, took the view that there was no error apparent on the face of the record indicating that the finding of the Commissioner, that the loss which was claimed by the assessee was not the result of any trading activity (was incorrect). As to the finding of the Tribunal for the subsequent year, it was observed by the learned judge that in law, on the basis of the finding for a subsequent year, the assessee did not enjoy any right of revision in respect of the previous year if the order of the previous year was otherwise valid. Upon the said findings, the learned judge discharged the rule nisi. Hence this appeal.
7. Dr. Debi Pal, learned counsel appearing on behalf of the appellant, has strenuously urged that as the accounts of the business of the appellant in India had been maintained in pound sterling in the head office of the appellant in London, the loss suffered by the appellant on account of a devaluation of the rupee currency was a trading loss and should have been allowed by the Revenue. In support of this contention, the learned counsel has placed much reliance on a decision of the Supreme Court in Sutlej Cotton Mills Ltd. v. CIT : 116ITR1(SC) . In that case, Bhagwati J., speaking for the court, observed as follows (p. 13) :
'The law may, therefore, now be taken to be well settled that where profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency held by it, on conversion into another currency, such profit or loss would ordinarily be trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading asset or as part of circulating capital embarked in the business. But, if on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature.'
8. Further, it has been observed by the Supreme Court that it would not be correct to say that where a loss arises in the process of conversion of foreign currency which is part of the trading assets of the assessee, such loss cannot be regarded as a trading loss, because the change in the rate of exchange, which occasions such loss, is due to an act of the foreign power. The loss is as much a trading loss as any other and it makes no difference that it is occasioned by the devaluation brought about by an act of State.
9. In the instant case, the question whether the alleged loss is a trading loss or a capital loss does not arise, for, it is not disputed before us that if really any loss has occasioned to the appellant on account of devaluation of Indian rupee, such loss would be a trading loss. But the real question is whether any loss has been suffered by the appellant on account of such devaluation. It is claimed on behalf of the appellant that in considering whether there has been a loss for the year relevant to the assessment year 1967-68, the accounts kept by it in pound sterling in the London head office should be the basis for the computation of profit and loss.
10. On the other hand, Mr. Suhas Sen, learned counsel appearing on behalf of the Revenue, submits that as the assessee carried on business in India and all the income of the appellant accrued to it in India, the accounts maintained by the assessee in India in rupee currency should be taken into consideration for the purpose of assessment. It is submitted that if the accounts maintained by the appellant in India is taken into account, there would be no question of any loss suffered by the appellant on account of devaluation of Indian rupee.
11. In this connection, we may refer to another observation of the Supreme Court in Sutlej Cotton Mills' case : 116ITR1(SC) , that the way in which entries are made by an assessee in its books of account is not determinative of the question whether the assessee has earned any profit or suffered any loss. In Chainrup Sampatram v. CIT : 24ITR481(SC) , it has been laid down by the Supreme Court that the source of profits andgains of a business is indubitably the business, and the place of their accrual is where the business is carried on.
12. It is true that as laid down by the Supreme Court in Sutlej Cotton Mills' case : 116ITR1(SC) , if any trading loss arises on account of conversion of foreign currency such loss should be allowed in assessing the income of the assessee for the purpose of payment of income-tax. But before an assessee can claim that he has sustained a trading loss on account of devaluation of foreign currency, it must be proved that such loss has been occasioned directly as a result of devaluation. As has been stated already, the business of the appellant was carried on in India and the income from such business accrued to the appellant in India. It is also not disputed that an account was maintained by the appellant in India. The devaluation of the Indian rupee had no direct impact on the profit or loss of the business carried on in India inasmuch as the assessment was also made in India. The devaluation of the Indian rupee would have resulted in a loss in the appellant's trading business if the assessment had been made in London. In our opinion, when the business is carried on and profits and gains of such business accrue to the assessee in the same country where the assessment is made for the purpose of payment of income-tax, the question of devaluation has no bearing whatsoever ; but where a business is carried on in one country and the assessment is made in another country, the question of devaluation of the currency of the country where the business is carried on will be relevant in assessing the profit or loss of the assessee from such business. The contention on behalf of the appellant that as the accounts of the business carried on by the appellant in India is maintained in pound sterling at its head office in London, which shows a loss of 54,897 as a result of devaluation of Indian currency, is without any substance (sic).
13. In the case of Sutlej Cotton Mills : 116ITR1(SC) , the assessee carried on business in West Pakistan and in terms of the official rate of exchange which was then prevalent, namely, 100 Pakistani rupees being equal to 144 Indian rupees, the profit of the assessee was assessed in India for the assessment year 1954-55. After the devaluation of the Indian rupee on August 8, 1955, the assessee succeeded in obtaining the permission of the Reserve Bank of Pakistan to remit a sum of Rs. 25,00,000 in Pakistani rupees out of the Pakistani profit for the assessment year 1954-55 and pursuant to this permission, a sum of Rs. 25,00,000 in Pakistani rupees was remitted by the assessee to India during the accounting year relevant to the assessment year 1957-58. The assessee also remitted to India during the accounting year relevant to the assessment year 1959-60 a further sum of Rs. 12,50,000 in Pakistani rupees out of the Pakistani profit for the assessment year 1954-55 after obtaining the necessary permission of the ReserveBank of Pakistan. But by the time these remittances came to be made, the rate of exchange had once again changed to 100 Pakistani rupees being equal to 100 Indian rupees and the amounts received by the assessee in terms of Indian rupees were, therefore, the same, namely, Rs. 25,00,000 and Rs. 12,50,000. Now, the profit of Rs. 25,00,000 in terms of Pakistani rupees had been included in the total income of the assessee for the assessment year 1954-55 as Rs. 36,00,000 in terms of Indian rupees according to the then prevailing rate of exchange of 100 Pakistani rupees being equal to 144 Indian rupees and, therefore, when the assessee received the sum of Rs. 25,00,000, in Indian rupees on the remittance of its profits of Rs. 25,00,000 in Pakistani rupees on the basis of 100 Pakistani rupees equal to 100 Indian rupees, the assessee suffered a loss of Rs. 11,00,000 in the process of conversion on account of appreciation of the Indian rupee qua Pakistani rupee. Similarly, on the remittance of the profit of Rs. 12,50,000 in Pakistani currency, the assessee suffered a loss of Rs. 5,50,000.
14. The facts in the above Supreme Court case show that on account of the appreciation of the Indian rupee the assessee had suffered loss in India, where the assessment was made, of the income of the assessee that arose in Pakistan. If there had been no repatriation of the said sums of money by the assessee to India, there could be no question of the assessee suffering any loss. In case there had been a profit on account of further devaluation of Indian rupee, the assessee could not claim that, as its accounts were maintained in Pakistan in Pakistani currency, it had suffered loss rather than any profit on account of devaluation. So, in our opinion, the question whether the appreciation or depreciation of a foreign currency has occasioned any loss to an assessee or not will depend on the place of assessment and the place where the income accrues to the assessee. If the business is carried on in one country and the assessment is made in another country, the question of appreciation or depreciation of currency of the country where the business is carried on will be relevant for the purpose of considering the profit or loss of the assessee. But where, as in the instant case, the business is carried on in the same country where the assessment is made, the question of the assessee suffering any loss or gaining any profit as a result of change in the exchange rate of currency between the country where the assessment is made and the country where the head office of the assessee is situate does not arise at all.
15. Much reliance has been placed on behalf of the appellant on the assessment for the subsequent year, that is to say, for the year relevant to the assessment year 1968-69. The Commissioner has pointed out certain differences between these two years. In our opinion, as the learned judge has rightly observed, the assessee has no right of revision in respect ofa previous year on the basis of the finding for a subsequent year. The decision of the Madras High Court in CIT v. L. G. Ramamurthi : 110ITR453(Mad) , on which reliance has been placed by the learned counsel for the appellant, is distinguishable on facts. In that case, certain gifts made by the members of an HUF were held to be sham by the Tribunal. On a reference to the High Court, no specific question challenging the correctness of this finding was raised. In the subsequent assessment year, a differently constituted Tribunal came to a different conclusion. On a reference to the High Court at the instance of the department, it was held that, in the absence of any fresh material, the Tribunal was not justified in coming to an entirely different and contrary conclusion on the same set of facts. In the instant case, the Commissioner has distinguished the finding of the Tribunal for the assessment year 1968-69 on facts. Apart from that, we are of the view that on the question of principle of law, one Tribunal is not bound by the decision of another Tribunal. It is now well settled that the decision of the ITO or a Tribunal in regard to a particular year does not operate as res judicata for the subsequent year. If the appellant had been aggrieved, it could have challenged the decision of the Tribunal on a reference to this court. The appellant, in our opinion, cannot rely upon the decision of the Tribunal for the assessment year 1968-69 for the assessment year 1967-68.
16. Apart from what has been said above, the learned judge was also justified in his observation that there was no error apparent on the face of the order of the Commissioner, which only would enable this court to quash the order.
17. For the reasons aforesaid, the judgment of the learned judge is affirmed and this appeal is dismissed. In view, however, of the facts and circumstances of the case, there will be no order for costs.
A.K. Sirkar, J.
18. I agree.