SABYASACHI MUKHARJI, J.

( 1 ) THIS reference under Section 256 (1) of the I. T. Act, 1961, relates to the assessment year 1967-68. Only one question has been referred to this court for answer. The question is as follows :" Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 13,02,495 represented revenue loss accruing to the assessee during the previous year relevant to the assessment year 1967-68 in consequence of devaluation of the rupee on June 6, 1966?"

( 2 ) THE assessee is a non-resident company having its head office at Belgrade, Yugoslavia, and the relevant assessment year is 1967-68 for which the previous year ended on 31st December, 1966. In the said assessment, the assessee had claimed devaluation loss of Rs. 14,55,970 representing depreciation in the value of the rupee in terms of Yugoslavia dinars on the 6th June, 1966, The amount was calculated with reference to the credit balance of the head office with the Indian branch and represented the difference between dinars and Indian rupee on conversion as on the 5th May, 1966, and the 6th June, 1966. In the assessment, this deduction was considered by the ITO, who was of the view that the loss debit-able to the head office could be claimed only at the time when the circulating capital was remitted from India to Yugoslavia and that as the remittances of the amounts due to the head office were made during January and March, 1968, the loss could not be considered in the assessment for the year 1967-68. Therefore, we have a finding which does not seem to have been altered by the Tribunal that the amount due to the head office from the Calcutta office was remitted in January to March, 1968, that is, beyond or subsequent to the relevant assessment year. The ITO was also of the view that the projects having been completed before the devaluation, there could be no expenses in respect of which the devaluation loss could be claimed and that the expenses subsequent to the devaluation would be debited at the next rate of exchange and there would be no question of devaluation loss in their cases. He also said in his order of assessment that the assessee should be considered as one unit, and therefore, there could be no question of loss on devaluation in respect of the liability of a branch to the head office of the same assessee, as any such loss, according to the ITO, would be on account of capital invested and not a revenue loss.

( 3 ) BEING aggrieved, the assessee went up in appeal before the AAC and contended that the devaluation loss must be allowed ia the assessment for the assessment year 1967-68, when it was incurred, if not, in the year 1969-70, at least when the remittances were made. The AAC in his order for the year 1967-68 held that the notional loss which was arrived at on the 6th June, 1966, could not be a revenue loss, as, according to him, the current account maintained by the head office with the Indian branch represented the capital employed in India. The AAC was of the view that the head office and branch office could not be considered to be separate entities and as a person could not make a profit or loss out of himself the loss on account of devaluation was relatable to capital invested and not revenue loss at all. The AAC also held that the company did not repatriate the circulating capital and it was not a trading expense.

( 4 ) THE assessee thereafter went up in appeal before the Tribunal. The Tribunal considered that the assessee was entitled to deduct the loss arising on account of devaluation in the assessment for the assessment year 1967-68, and gave its reasons. It would be better, in our opinion, to refer to the Tribunal's own order in rejecting the revenue's contention. The Tribunal observed as follows :"the assessee had brought funds from Yugoslavia for the purpose of its business in India. On June 5, 1966, it had Rs. 2,532,121. 89 equivalent to 6,646,819. 96 dinars. On June 6, 1966, cam

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