TMI Blog2009 (9) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... st determined whether the amounts were held by the appellant on capital account or on revenue account – in the present case, funds kept in UK were raised by issuing capital, thus it was held on capital account. Applying this test given due to exchange fluctuation would be capital gain – answered in favor of assessee. - 369, 364, 365, 368 of 2007 & 923 of 2008 - - - Dated:- 25-9-2009 - MR. JUSTICE A.K. SIKRI Ms. Prem Lata Bansal with Mr. Paras Chaudhary and Ms. Anshul Sharma, Advocates, for the appellant. Mr. M.S. Syali, Sr. Advocate with Mr. Satyen Sethi and Mr. Johnson Bara, Advocates, for the respondent. JUDGMENT The judgment of the court was delivered by A. K. SIKRI, J. - Common question which arises for considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee company as required by the Ministry of Finance, Government of India had informed them at the time of issue of share capital, the end use of the share capital in acquisition of fixed assets at 79% and General Corporate uses at 21%. The assessee company had also filed the audited statements of share capital repatriated at various intervals and used in the above-said manner to the Ministry of Finance, Government of India. The fixed deposits kept in U.K. and made out of share capital received in US Dollars had to be shown in Indian rupees in the balance sheet for each year at the exchange rate prevailing on 31st March. The assessee company during the year under appeal has accounted for in its balance sheet gain arising from exchange rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Madras High Court in the case of EID Parry Ltd. Vs. CIT , 174 ITR 11, wherein it was held that if foreign currency is held as capital asset or as fixed capital, profit or loss arising to an assessee on account of appreciation or depreciation in the value of foreign currency, would be in the nature of capital receipt. 6. It is, in these circumstances, the order of the Tribunal is challenged by the Revenue. According to the Revenue, following questions of law need to be determined: a) Whether the Income Tax Appellate Tribunal was correct in law in directing the Assessing Officer to treat the entire gain on account of exchange rate fluctuation as arisen to the assessee is not liable to tax? b) Whether the order of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the money thus raised represented share capital in foreign exchange, the gain on account of exchange rate fluctuations was attributable to the said share capital, such a gain would obviously be a capital gain. 9. The only argument which, in these circumstances, needs consideration is as to whether 21% of the said gain should be treated as revenue receipt because of the reason that 21% of the capital was to be utilized for general corporate uses. In this respect, it is difficult to accept the submission of the learned counsel for the appellant. It is not in dispute that the entire money collected in foreign exchange represented was share capital. Even use of this share capital raised, i.e., how this money is to be utilized, would be of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Press Works Ltd., Hyderabad etc. v. Commissioner of Income-tax, Andhra Pradesh-I, Hyderabad 228 ITR 253. These are not applicable in the present case inasmuch as in the case of Sutlej Cotton Mills Limited (supra), profits were earned by the company in Pakistan. There was devaluation of rupee by Pakistan and when subsequently those profits were remitted to India, there was loss due to exchange fluctuation. The question was as to whether such a loss was business loss or not. The Supreme Court opined that this question as to whether the loss suffered by the appellant was a trading loss or a capital loss could not be answered unless it was first determined whether the amounts were held by the appellant on capital account or on revenue accou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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