TMI Blog1962 (3) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Officer brought to tax the sum of ₹ 1,27,125 on the result of the said transaction of purchase and sale. The contentions of the assessee before the revenue authorities were that it was not the business of the assessee to deal in exchange of foreign currency and, secondly, that the surplus in question was not taxable as it was in the nature of a windfall and a casual receipt. The Tribunal held that the purchase and sale of exchange constituted business transactions, though they were not in the line of business of the assessee. Counsel on behalf of the assessee contended first that the nature of the article was such that there could be no trade having regard to the article. Secondly, the memorandum does not empower the assessee company to trade in foreign exchange. Thirdly, the company is formed mainly for the purpose of dealing in real estate. Fourthly, this was the only solitary instance when the assessee entered into a contract to buy and sell foreign exchange. Fifthly, it was not in the line of the business of the assessee to buy and sell foreign exchange. Sixthly, no money was paid to the bank initially when the contract was entered into nor was any money paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r must have recourse to some organisation and activity of the kind that is required in trade. The third test is whether the thing purchased is such as must be subjected to some processing for the purpose of making it marketable. In the present case it cannot be said that the foreign exchange was acquired for the purpose of pride of possession nor can it be said that any organisation is required to sell foreign exchange nor that any processing is required to make foreign exchange marketable. Therefore, the only test which will be applicable here is whether there was any intention to turn the commodity over for the purpose of making profit. The facts in the present case show that the actual purchase was on June 15, 1949. It was a forward contract inasmuch as the time for delivery stipulated in the, contract was July 15 and August 15. The assessee did not take delivery on the due date but paid interest and kept the contract alive. It would appear at page eight of the paperbook that the sum of ₹ 1,282-13-6 was paid as interest to the bank. Counsel for the Commissioner in my view rightly contended that under the Foreign Exchange Act any person acquiring foreign exchange had to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here otherwise expressed in such paragraph be in any wise limited or restricted by reference to or inference from the terms of any other paragraph with the result that the court is bound to give effect to the intention thus expressed. Counsel for the Commissioner relied on the decision in Cotman v. Brougham [1918] A.C. 514 in support of the rule of construction with regard to the objects of the assessee that the objects are to be read separately and that the paragraphs in the objects clause do not control each other. Counsel for the Commissioner thus rightly contended that it would be within the objects of the assessee to deal in foreign exchange as a kind of business and he relied on the decision in Board of Revenue v. Arunachalam Chettiar [1924] I.L.R. 47 Mad. 197 that dealings in foreign exchange may be in the course of business. If, however, foreign exchange is bought as an investment or on capital account the profit made on realisation will be capital appreciation and not income. Counsel for the assessee relied on the decision in McKinlay v. H.T. Jenkins Son Ltd. [1926] 10 Tax Cas. 372. In that case a company of marble merchants agreed to sell marble to a contractor and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R. (Suppl.) 1; 32 Tax Cas. 133. In that case the assessee, a British company operating in China, required its Chinese agent to deposit with it certain sums in Chinese dollars which carried interest and were repayable on the determination of the agency. The assessee kept the dollar deposit in Shanghai banks. On the outbreak of war the assessee sold the Chinese dollars for sterling, transferred the sterling to the United Kingdom and placed the amount on deposit with its parent company. Subsequently, the agency was terminated. To repay in Chinese dollars the deposits of the agents the assessee repurchased Chinese dollars at a substantial profit due to depreciation of the Chinese dollar and paid off the deposits. It was held that the taking of deposit was not a trading transaction and the profit was not an assessable income but was an appreciation of a capital asset not forming part of the asset employed as circulating capital in the trade. This decision does not help the assessee in the present case because in the Shell Company case [1952] 22 I.T.R. (Suppl.) 1; 32 Tax Cas. 133 the foreign exchange was to start with capital and nothing happened to change that capital character. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereas in the present case no money was paid by the assessee and on the contrary interest was paid by the assessee to the bank for the purpose of keeping the contract alive and it amounted to borrowing of capital. In the second place, counsel for the Commissioner contended that the betting is held to be income but exemption is claimed and allowed. In the case of Graham v. Green [1925] 9 Tax Cas. 309 Rowlatt J. said at page 313: The trade or vocation which has to do with differences in prices may be popularly spoken of as gambling, there is no intention really to accept or deliver the article. But they are operations in relation to the differences of prices of commodities and there is an element of fecundity in those and indeed those operations form the subject of a great deal of trade. I am, therefore, of opinion that the transaction here in essence is a dealing in difference on a certain commodity and has a trading element in it. Counsel. for the Commissioner relied on the decision in Commissioners of Inland Revenue v. Fraser [1942] 24 Tax Cas. 498, where a wood-cutter in 1937 and 1938 bought through an agent for resale whisky in bond. That was his sole dealing in whisk ..... X X X X Extracts X X X X X X X X Extracts X X X X
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