1. SALEEM AKHTAR, J.---The respondent is a non-resident company which derives its income from sale of Type-writer and office equipment. In the assessment year 1973-74 respondent made a claim of Rs.7,28,955 for exchange loss caused by devaluation of Pakistan Rupee. This was disallowed by the Assessing Officer and was maintained in appeal. The Tribunal, however, admitted this claim. The Tribunal also found that loan was repatriable in Pound Sterling and the respondent was not able to pay loan during the assessment year 1973-74 and had obtained extension from the State Bank of Pakistan who had guaranteed the loan and such guarantee was extended from year to year. It was permitted to repay the loan in Pound Sterling whenever sufficient remitable cash balance was available. The Tribunal also held that the loan was non- interest bearing and repatriable and was obtained to augment working capital. These findings have not been challenged by the Department. Following question was referred at the instance of the Department:--- "Whether, on the facts and in the circumstances of the case, it was rightly held by the Appellate Tribunal that a sum of Rs.7,28,955 claimed by the assessee as foreign exchange loss is an admissible deduction under section 10(2) of the Act."
2. From the tenor of the question it is clear that the Department has not challenged the findings of fact which are necessary for applicability of section 10(2) of the Act. It is, therefore, established that the respondent had obtained a loan to augment working capital and such arrangement was duly sanctioned and guaranteed by the State Bank of Pakistan. In these circumstances the respondent was entitled to claim the foreign exchange loss due to devaluation. The learned counsel for the parties have referred to General Tyre & Rubber Co. Of Pakistan Ltd. v. The Commissioner of Income- tax, Central Zone, Karachi 1989 PTD 582 where after considering various authorities it was observed as follows:-- "Where an assessee under any arrangement, business dealing or contract is obliged to pay any party in foreign currency then it incurs a liability in foreign currency. If the devaluation of a currency adversely affects the liability of the assessee it has to procure same amount of foreign currency by spending more local currency and then it suffers a loss."
3. We respectfully following the aforesaid judgment answer the question in the affirmative.