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TMI Blog1977 (11) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... he included that amount in the total income of the assessee for assessment. The assessee was carrying on business in Ceylon where it had a branch, but its financial control was being controlled by the head office at Madras. The assessee's case was that the profits originally received in the branch in Ceylon could not be repatriated to the country from Ceylon due to the policy of the Ceylon Government in the relevant years and these amounts became receivables in excess of the original profits which could not be repatriated in view of the subsequent remittance to this country after devaluation of the Indain rupee and, therefore, the difference being the appreciation brought about by the devaluation of the Indian rupee, was only capital receipt and not revenue receipt. The assessee's appeal before the Appellate Assistant Commissioner failed, as the Appellate Assistant Commissioner agreed with the Income-tax Officer and held that the extra amount received by the assesee due to the devaluation was business profit, and he confirmed the order of the Income-tax Officer. The facts are these : The profits of the years ending March 31, 1964, and March 31, 1965, earned in the branch in Cey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o certain forward contracts with foreign buyers before that date for the sale of cashew kernels and the value of those goods had also to be received after the date of devaluation. The rupee equivalent of the price in dollars was received by the assessee after the devaluation and consequently it was received at the post devaluation rate. In that process, the assessee earned a sum of Rs. 2,54,862 being the appreciation in the exchange value of the price in dollars in terms of the Indian rupee. The learned judges have observed thus : " The assessee contended that the decision of the Supreme Court in Commissioner of Income-tax v. Tata Locomotive and Engineering Co. Ltd. [1966] 60 ITR 405 must be held to have impliedly overruled the decision of the Mysore High Court referred to earlier. In the Supreme Court case, the question arose this way. The assessee-company carrying on the business in the manufacture of locomotives had to make purchases of plant and machinery from the U.S.A. For this purpose the assessee remitted to its agents in the U.S.A. large amounts with the sanction of the exchange control authorities. Some amounts due to them from other business transactions in America wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equently sold or encashed through the assessee's correspondent-banks in the foreign countries, and the proceeds were credited to the current account of the assessee with the correspondent-banks concerned. Consequent on the devaluation of the Indian rupee on June 6, 1966, the amounts credited to the assessee in the foreign banks increased to the extent of Rs. 4,65,515. That excess realisation on devaluation was treated by the Income-tax Officer as the income of the assessee during the account year ending December 31, 1966, rejecting the assessee's contention that the profit was in the nature of a windfall. On appeals, the Appellate Assistant Commissioner and the Appellate Tribunal also came to the same conclusion. The learned judges observed : " The assessee has repeated his contention before this court that the excess realisation of Rs. 4,65,515 on devaluation cannot be treated as a revenue receipt but only as a casual receipt in the nature of a windfall by virtue of the devaluation. The business of the assessee being a banking business and as part of its banking business it was purchasing cheques, payment orders and mail transfers, demand drafts, bills and other negotiable instr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never ceased to be the stock-in-trade at the time when devaluation of the Indian rupee was announced and, therefore, the appreciation in the value of the sale proceeds of these assets which was the stock-in-trade of the assessee represented the trading receipts of the assessee only. The principle of the decision of this court in Shamsuddin and Co. v. Commissioner of Income-tax [1973] 90 ITR 323 (Ker) is also applicable to the facts of this case. In the light of these decisions and the finding of fact arrived at by the Tribunal the conclusion that this sum of Rs. 4,65,515 constituted the business income in the year of account has to be sustained." We are of the opinion that the two decisions referred to above are not applicable to the facts of the present case, for, the excess arising out of the devaluation had been received directly as a result of the business transaction in those cases whereas in the present case the profit had been received in 1963 and 1964, prior to the devalution of the rupee on June 6, 1966, and had also been taxed and the amount could not be remitted to India from the assessee's branch in Ceylon due to the policy of the Ceylon Government which was in force ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also, the findings of the Appellate Tribunal were not challenged on behalf of the Commissioner of Income-tax. On the other hand, it appears that it was conceded by the applicant before the High Court that there was no evidence that the 'blocked' balance was, in fact, employed by the Karachi branch for the internal banking operations in Pakistan or for its business in Pakistan and other foreign currencies. It is, therefore, not permissible for the appellant at this stage to go behind the two statements of the case and to challenge the findings of fact contained therein. The argument was also stressed by Mr. Hazarnavis that the money was 'stock-in-trade' of the bank and an increment of Rs. 1,70,746 due to the fluctuation in the exchange rate must, therefore, be treated as incidental to the business of the bank. We shall assume in favour of the appellant that the money was ' stock-in-trade ' of the bank. But it does not necessarily follow that the increment due to the fluctuation in the exchange rate was due to trading operations in the carrying on of the banking business. On the contrary, it has been found by the Appellate Tribunal that the amount of Rs. 3,97,221 was 'a blocked' and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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