9911796707
TMI Blog1984 (9) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... rough banking channels for realisation of the price of the goods exported from the buyers. Naturally, the buyers pay the money to the bank concerned in the relevant foreign exchange and after transmission from the collecting bank, the amount mentioned in the invoice bills is received by the assessee through banking channels inIndiain rupees, that amount being credited to the assessee's account inIndia. Due to exchange fluctuation, the amount finally received in rupees may be in excess or short of the amount shown by the assessee in its books at the time of the despatch of the goods. In the year under consideration, the assessee, however, had a net surplus of Rs. 4,04,972. The assessee for the first time raised a contention before the Commissioner (Appeals), based on the ratio of the decision of the Calcutta High Court in the case of Indian Leaf Tobacco Development Co. Ltd. v. CIT [1982] 137 ITR 827, that the said net surplus of Rs. 4,04,972 was a capital receipt not chargeable to tax. The Commissioner (Appeals), after referring to the ratio of the decision of the Calcutta High Court and distinguishing it and relying on the ratio of the decision of the Delhi High Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Development Co. Ltd.'s case, according to Mr. Ganeshan, lays down that where a surplus arises due to a fluctuation in the exchange rate, the true test to find out if such surplus is assessable is to find out if it arose out of any trading activity. It must be a result of a trading activity of the assessee or it must arise or result from the trading activity of the assessee. Merely because the holder of a currency gets something more than what it would have got otherwise, would not transform the accretion into a trading profit unless the holding or the dealing in foreign exchange of the particular currency was the trading activity of the assessee concerned. In the light of this test, Mr. Ganeshan has argued that since the invoice bills were raised by the assessee in foreign exchange and the amount in question was recovered by the bank concerned from the buyer in foreign currency, the appreciation of the currency at the time of conversion or repatriation to India has nothing to do with the trading activity of the assessee inasmuch as the assessee was not a dealer in foreign exchange. The profit or the excess amount realised arose on account of the assessee holding the said currency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 723 toEnglandand $ 1561 to theUnited States of Americabefore6-6-1966. On that date, the Indian rupee was devalued. The result was that the company received in terms of rupees a sum of Rs. 26,757 as the price of the goods sold by it instead of Rs. 16,998, which it would have received had there been no devaluation. The tax authorities and the Tribunal had held that the excess amount realised was not a capital receipt, but taxable revenue receipt. The Tribunal for coming to the said conclusion had observed that the surplus or excess was an integral part of the sale transactions which was a routine day to day operation of the carrying on of the assessee's business. It had nothing to do with the permanent framework or the fixed apparatus or the structure of the assessee's business. The assessee then took the matter to the Delhi High Court who have agreed with the Tribunal by observing that the excess amount received by the assessee was the excess price received by it in respect of the sale of its stock-in-trade. It was an integral part of the routine operations of the assessee's business. It is not the assessee's case that this amount had been segregated or that it had been sterilised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f pages 836 and 837 that " We must emphasise that in this case the Tribunal has categorically made a finding that the amount represented profit on exchange. It is not a profit due to fluctuation or escalation of price in respect of the export sales. " The decision by the High Court has, therefore, been rendered in the light of those facts. The facts in the present case, as brought out above, are entirely different. They are similar to those, which were before the Kerala High Court in M. Shamsuddin Co.'s case and Delhi High Court in Fabindia's case. It may be interesting to mention at this stage that their Lordships of the Calcutta High Court in Indian Leaf Tobacco Development Co. Ltd.'s case, at page 842, have distinguished the decision of the Kerala High Court in the case of M. Shamsuddin Co., after recording the facts in that case, which are similar to the facts in the appeal before us, the Calcutta High Court next recorded the decision of the Kerala High Court in M. Shamsuddin Co.'s case and then distinguished that decision by observing as under : " ...On a reference, the High Court, agreeing with the Tribunal, held that as a result of the devaluation the assessee became ..... X X X X Extracts X X X X X X X X Extracts X X X X
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