1966 (1) TMI 24 - SUPREME COURT

Whether on the facts and in the circumstances of the case, the surplus or difference arising as a result of devaluation in the process of converting dollar currency in regard to the sum of $36,123.02 repatriated to India was profit which was taxable in the hands of the assessee ?

Whether the said sum of $36,123.02 having been taxed in the relevant earlier years, the surplus or difference in dollar exchange account arising by reason of the repatriation thereof as a result of devaluation was rightly taken as profit taxable ?

Held that:- In our view it was not a trading transaction in the business of manufacture of locomotive boilers and locomotives; it was clearly a transaction of accumulating dollars to pay for capital goods, the first step to the acquisition of capital goods. If the assessee had repatriated $36,123.02 and then after obtaining the sanction of the Reserve Bank remitted $36,123.02 to the U.S.A., Mr. Sastri does not contest that any profit made on devaluation would have been a capital profit. But, in our opinion, the fact that the assessee kept the money there does not make any difference especially, as we have pointed out, that it was a new transaction which the assessee entered into, the transaction being the first step to acquisition of capital goods.

In our view the High Court was right in answering the questions in the negative. In the result the appeal fails and is dismissed.