HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Commissioner of Income Tax, Karnataka (Central), Bangalore and Others v. Chowgule and Co. Ltd.
Civil Appeal No. 1650 of 1996
[1996] 1 SCR 367 ·
263
Sources & disclosures includedDownload original judgment / order
Two-judge bench · Dr. A.S. Anand, J. · Suhas C. Sen, J.
Assessment years: 1984-85
01 · Facts of the case
The exporter sold iron ore to foreign buyers and presented shipping documents through Indian banks under letter-of-credit arrangements. Banks converted payments and credited rupees during the accounting period. The receipts were offered for assessment, while amounts still outstanding at the year-end were translated at that date’s exchange rate (physical pages 3–5).
On 30 March 1989 the Commissioner invoked section 263, directing the officer to compare actual conversion rates with the year-end telegraphic-transfer buying rate and add a difference if favourable to Revenue. The Bombay High Court quashed the revision and also held clause (c) of rule 115 ultra vires. Revenue appealed both aspects (physical pages 3–4).
Source: See the proposition-specific paragraph and PDF-page references below.
02 · Discussion by the Hon’ble Court
The historical rule fixed the telegraphic-transfer buying rate for converting foreign-currency income at the specified date. Its quoted Explanation used the last day of the preceding month for salaries due or paid in advance or arrears, and for interest on securities becoming due. For the clause (c) categories, including business income other than clause (d) income, it used the last day of the previous year. The report omits the contents of clauses (d)–(f), so it does not supply a complete rule text (physical page 6).
The rule did not require amounts already converted into rupees during the accounting period to be translated again. If no foreign currency remained or was receivable in respect of those receipts at year-end, there was nothing to convert under that provision. The parties did not dispute year-end conversion of the foreign-currency amounts still outstanding (physical pages 7–8).
The Court treated the sub-rule introduced from 1 April 1990 as clarificatory. As quoted, it covered clause (c) income received in or brought into India by or for the assessee before the specified date in accordance with the Foreign Exchange Regulation Act, 1973. That later sub-rule (2) was distinct from the original Explanation (2) defining the specified date (physical pages 6–7).
Accordingly, the taxpayer’s completed rupee receipts did not support the section 263 revision. But the rule itself was valid: the High Court’s contrary construction and striking down were erroneous. Relief against the particular revision and validity of the rule were different questions (physical pages 7–8).
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03 · Judicial decision
The appeal was disposed of without costs. Quashing of the section 263 order was sustained, while the High Court’s invalidation of rule 115 was rejected. The Court made no new exchange-rate calculation or tax-demand computation; the undisputed outstanding amounts remained subject to the stated year-end conversion (physical page 8).
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04 · Outcome / in whose favour
In whose favour: Mixed: assessee retains relief from revision; Revenue succeeds on rule validity
Revision remains quashed; striking down of rule 115 reversed; appeal disposed of, no costs
Final historical rule construction and validity ruling
Not a rule for every income head, foreign-currency asset or subsequent accounting/recognition regime; no new computation awarded.
Source: See the proposition-specific paragraph and PDF-page references below.
05 · AKHB REVIEW POINT
Separate receipts already converted into rupees from balances still denominated in foreign currency. Preserve bank-credit dates, actual conversions and year-end receivables before applying an exchange-rate rule. The Commissioner’s proposed higher-of-two-rates approach did not follow from the provision on these facts.
A taxpayer victory against a revision does not imply invalidity of the underlying rule. This judgment preserves the rule while rejecting its application to completed rupee conversions. The quoted historical version includes different specified dates for different income categories, so its business-income discussion is not a universal year-end rule.
The Court’s clarificatory treatment of the 1990 sub-rule is a holding about that amendment. It does not verify every later change to rule 115, exchange-control law, ICDS, income recognition or the 2025 Act. No comprehensive subsequent treatment is certified.
Source: See the proposition-specific paragraph and PDF-page references below.
Proposition-specific source paragraphs and PDF pages
- topic
- Identity, stated year/period and separate issues
- source url
- Open cited source
- pdf pages
- 1; 3
- paragraphs
- Unnumbered judicial text
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- reported metadata and judicial text
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- Banking facts and Commissioner’s proposed revision
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- Open cited source
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- 4; 5
- paragraphs
- Unnumbered judicial text
- source role
- judicial text
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- Historical rule and clarificatory sub-rule distinction
- source url
- Open cited source
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- 6; 7
- paragraphs
- Unnumbered judicial text
- source role
- judicial text
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- Completed rupee receipts, outstanding balances and split result
- source url
- Open cited source
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- 7; 8
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- Unnumbered judicial text
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- judicial text
Judicial authorship and separate opinions
Suhas C. Sen, J.Act identified in the reviewed source
Income-tax Act, 1961Assessment-year scope and limits of the operative direction
The judicial text expressly gives AY 1984-85 and the accounting period 1 July 1982–30 June 1983. Both are retained as printed, without an inferred year correction.Rules actually considered
Income-tax Rules, 1962, historical rule 115 and later sub-rule (2)Source & verification
Download original judgment / order · Open cited source rendition
Identified source rendition: 8 PDF pages; SHA-256 c58c4253d34750c8c1ad5b8387f52288bdd824f62744baecea42fbe1a3dbe77e. Original bytes preserved. Complete judicial text physical pages 3–8/SCR 369–374, preserving separate statutory-validity and taxpayer-revision outcomes.
- The report expressly pairs AY 1984-85 with 1 July 1982–30 June 1983; no alternate assessment year is silently substituted.; The High Court origin line is printed 3/4.3.92. The note does not turn that wording into a single independently verified calendar date.; The section 263 direction quoted in the source proposed year-end retranslation only if favourable to Revenue. That was the Commissioner’s approach, not a Supreme Court-approved calculation.; Rule 115’s original Explanation (2) defining specified date is distinct from the later sub-rule (2) effective 1 April 1990. The later provision, as quoted, applies to clause (c) income received in or brought into India before the specified date in accordance with the Foreign Exchange Regulation Act, 1973; its conditions are not a universal exception for every income head.; The historical quoted rule omits the contents of some clauses. The note does not reconstruct those omitted categories or certify a complete current rule.; The amounts actually credited in rupees and the foreign-currency receivables at year-end are distinct; the judgment supplies no final rupee addition.
Statutory scope
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Later treatment
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Identified source links
- reported judgment — PDF 8 pages
SHA-256: c58c4253d34750c8c1ad5b8387f52288bdd824f62744baecea42fbe1a3dbe77e
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