1972 (7) TMI 8

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..... e, a firm of four partners, owns cashew factories and exports cashew kernels to foreign countries, mostly to U.S.A. The assessee also has forward transactions of sale with some of the foreign buyers. The invoice price of the exports is fixed between the parties in terms of dollars. For the forward contracts of sale also, the price is stipulated in terms of dollars. At the time of payment the assessee receives the rupee equivalent of the price in dollars. The Indian currency was devalued on June 6, 1966. As on that date, the assessee had to receive the value of exports made immediately before that date. The assessee had also entered into certain forward contracts with foreign buyers before June 6, 1966, for the sale of cashew kernels, and t .....

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..... e sale price was occasioned by the devaluation which has nothing to do with the trade. But, the result of the devaluation was that the assessee became entitled to receive a larger price in terms of rupees for his goods and that is directly in the course of the trade and constitutes a trading profit. A similar question arose before the Mysore High Court in Hindustan Aircraft Ltd. v. Commissioner of Income-tax. In that case the assessee, a private limited company which was carrying on business in assembling and over hauling aircraft, undertook in the course of its business to repair and over haul at its Bangalore factory the aircraft belonging to Messrs. Saudi Arabian Airlines and Arabian American Oil Company. These companies had to pay their .....

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..... For this purpose the assessee remitted to its agents in U.S.A. large amount with the sanction of the exchange control authorities. Some amounts due to them from other business transactions in America were also diverted and formed part of the remittance for the purchase of the plants and machineries. The pound sterling and with it the Indian rupee were devalued in September, 1949, and the assessee found it very expensive to buy the American goods and so with the permission of the Reserve Bank of India, withdrew a large part of its remittances made to America. By reason of the devaluation at the current exchange rate the rupee equivalent of the dollars was much higher than what had been remitted, and the surplus was treated by the Income-tax .....

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