9911796707
TMI Blog1983 (1) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... s of rupee currency and receives remittances from the Penang branch in the same currency. The Penang branch, however, maintains its accounts in terms of Malaysian dollars, which is the local currency in Penang. What the Penang branch does is to enter the cost of the goods received from India in terms of dollars. After sales in Malaysia, which yields Malaysian dollars, the Penang branch makes remittances to the head office in India after converting the dollars into rupees. During the period January 31, 1966, to March 18, 1966, the assessee sent from its head office in India to the Penang branch goods, valued in terms of rupee currency, at Rs. 2,52,570. In terms of Malaysian currency, the value amounted to 1,62,957.47 Malaysian dollars at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O that the sum of Rs. 1,44,845 represented the trading profits of the assessee. At the same time, the Tribunal also did not accept the assessee's contention that the amount of exchange increment of Rs. 1,44,845 was a mere windfall, not liable to be taxed under the I.T. Act. The Tribunal took a third position. According to the Tribunal, this amount represented short-term capital gains. The Tribunal directed the ITO to modify the assessment on this basis. The Department have now come on a reference to this court having obtained a stated case from the Tribunal on the following question of law : " Whether, on the facts and in the circumstances of the case, the sum of Rs. 1,44,845 or any other sum could be treated as revenue or, in the alterna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequences. Learned counsel submitted that in such a kind of business, it was not necessary that the assessee should indulge in regular dealings in foreign exchange in order that exchange losses or exchange gains may be regarded as part and parcel of its trading results. It was submitted that even though the particular gain of Rs. 1,44,845 in the year of account was the result of a fortuitous circumstance, namely, the devaluation of the Indian rupee, it can by no means be regarded as windfall, since the receipt was a necessary incident of the very nature and character of the assessee's business. We accept the contentions put forward by Mr. Rangaswami for the Department as well founded. Exchange fluctuations being reflected in the trading re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal's theory that it represents a short-term capital gain. The assessee's theory is wrong, because there is nothing casual about the receipt. Even if the amount of Rs. 1,44,845 representing an exchange profit had arisen from an unexpected or unforeseen circumstance of the devaluation of the Indian rupee, it cannot escape taxation. For, under s. 10(3) of the I.T. Act, 1961, even casual receipts will not be excluded from the application of the I.T. Act if they constitute receipts arising from business or from the exercise of a profession or occupation. There can be no doubt in this case that, but for the transactions of exports from the assessee's head office in India to its branch in Penang, there could not have been any possibility of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the partners and crediting each of the partners with an equal share therein. It is, however, trite law that the character either of a receipt or of an outgoing or loss in a business is not concluded or even indicated, by the way in which the book-keeper deals with them in the writing up of the accounts. We are satisfied that in this case neither the assessee nor its Penang branch did, or could, treat the excess of dollars which emanated owing to the devaluation of the rupee, as a capital gain derived from any short-term capital assets. Of the decisions cited at the Bar we need refer only to the decision of the Supreme Court in Sutlej Cotton Mills Ltd. v. CIT [1979] 116 ITR 1. In that case, an Indian company, having its head office in Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have pointed out that the assessee has not purported to hold Malaysian dollars as a separate fund so as to enable it to deal with those dollars as a capital asset. We have referred to the course of trade as well as the course of monetary dealings between the assessee's head office and its Penang branch. We have referred to the circumstances in which the devaluation of the Indian rupee had reflected itself in the position of remittances of the Penang branch to the assessee's head office in India, as well as their quantum. We have also made reference to the fact that apart from the year-end adjustment of the amount of Rs. 1,44,845 in the capital account of the partners, no attempt has been made even in a book-keeping manner to deal with t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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