1966 (10) TMI 33 - SUPREME COURT

Whether the profit of the bank on account of fluctuation of exchange arose in the course of trading operations of the bank or whether it was incidental to any such trading operation?

Held that:- The money changed its character of " stock-in-trade ". when it was " blocked " and " sterilised " and the increment in its value owing to the exchange fluctuation must be treated as a capital receipt. It has also been found by the Appellate Tribunal that the said amount of ₹ 3,97,221 was not utilised for internal banking operations within Pakistan and it is hence not possible to draw an inference that the bank realised any profit in the carrying out of its business. We accordingly hold that Mr. Hazarnavis is unable to make good his argument on this aspect of the case and the High Court was right in reaching the conclusion that the exchange difference of ₹ 1,70,746 was not assessable to income-tax. Appeal dismissed.