TMI Blog1962 (6) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... ican Oil Co. In respect of those contracts, the said two clients of the assessee had to pay their dues in dollars to the company's bank in America. On September 19, 1949, the Indian rupee was devalued and, at that time, the assessee held with its bankers in the U.S.A. a sum of $ 1,98,202.75. These dollars were originally valued in the books of the assessee at the old rate of exchange, i.e., ₹ 3.33 per dollar. On account of devaluation of the rupee, the exchange rate was fixed at ₹ 4.75 per dollar. Consequent upon that, when the dollar balances were valued at the new rate of exchange there was an appreciation in their rupee value to the extent of ₹ 2,80,639. The Income-tax Officer held that the gain in question is liable to tax. He rejected the assessee's contention that the same was exempt from tax under section 4(3)(vii) as the accretion in question was a mere windfall. It was also contended before the Income-tax Officer without success that it was unfair to tax the company on a mere book entry. Those very contentions were raised before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner held that the accretion in question was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wallace Co., [1932] 2 Comp. Cas. 276; 59 I.A. 206 by limiting income to 'a periodical monetary return coming in with some sort of regularity, or expected regularity, from definite sources' but, in our opinion, those remarks must be read with reference to the particular facts of that case. The nonrecurring aspect of this kind of receipt was considered by the Privy Council in The King v. B.C. Fir Cedar Lumber Co., [1932] A.C. 441, 448 and we do not think their Lordships had in mind a case of this nature when they decided Shaw Wallace and Company's case, [1932] 2 Comp. Cas. 276; 59 I.A. 206. Hence the real question for decision in this case is whether those receipts arose from business . Business is defined in section 2(4) as including any trade, commerce, or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. Even a single transaction may constitute business under the definition; it is not essential that there should be a series of transactions. As held by the Tribunals below, the assessee's dollar holdings in America were partly built up by receipts received from its clients and partly by remittances made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehalf of the assessee while highlighting the casual and non-recurring aspect of the receipts completely overlooked the other requisite that the receipts in question should not have arisen from business. Section 4(3)(vii) as noticed earlier lays down two conditions to entitle the exemption provided therein. When a claim for exemption is made, the authorities will have to ask themselves only two questions, viz.: (1) whether the receipts in question arose in the course of business; and (2) were they casual and non-recurring in nature. Hence, we are unable to accede to the contention of the learned counsel for the assessee that we should draw a line between the receipts proper and the accretion thereto. Assistance had been sought by the counsel on either side from decided cases. But no case directly bearing on the point under consideration was brought to my notice. The cases read to us, at any rate some of them, were of considerable assistance but not one of them dealt with the problem that we are called upon to deal with. The learned counsel for the assessee strongly relied on the decision of this court in Canara Bank Ltd. v. Commissioner of Income-tax, [1963] 47 I.T.R. 529 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was seized by the company to make a quick profit by selling the lire. The company again purchased lire for the purchase of the marble for which they paid less than the sum at which they sold the lire when they made their exchange profit. Rowlatt J. held that the profit was not a revenue profit but a capital, and the reason he gave in support of his view was that since the foreign currency was bought purely as a speculation and not as consumable stock, any profit made was in the nature of an appreciation of a temporary investment and was therefore a capital profit. But, he proceeded to observe thus, at page 405: It was, as I say, a mere appreciation of something which they had got in hand, and I think the Commissioners were bound to hold (because I see no evidence at all to the contrary) that it was not merged in a business of the company. It may be that, if the company were seeking to declare a dividend, nobody could say it was ultra vires to treat this advantage as a divisible sum. Their capital was intact; they had had cash; they had put it into an article of commerce; they had got it out again ; they had got all the cash they ever had, and more cash, and as far as I unders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. On the outbreak of war, in September, 1939, the appellant company, at the request of the Treasury, stopped all further purchases of tobacco leaf in the United States, and as a result, the company had on hand a holding of dollars which had been accumulated between January and August, 1939. On 30th September, 1939, the company was required under the Defence (Finance) Regulations, 1939, to sell its surplus dollars to the Treasury, and, owing to the rise which had occurred in the dollar exchange, the sale resulted in a profit for the company. This profit was included in assessments upon the company to income tax under Schedule D, Case 1, and to National Defence Contribution. On appeal to the Special Commissioners, the company contended that, in the events which had happened, the profit was a realised appreciation of a temporary investment in foreign currency and not a profit of its trade. The Commissioners found that the profit from the sale of dollars to the Treasury had been correctly brought into the computation of the profits of the company's trade and dismissed the appeals. Before the King's Bench, strong reliance was placed on behalf of the assessee on the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92, 301-2: Rowlatt J.'s own view of his decision in that case, and the grounds of it, are referred to by him in Thompson's case [1927] 12 Tax Cas. 1091. In Thompson's case [1927] 12 Tax Cas. 1091 Rowlatt J. said that Mckinlay's case [1926] 10 Tax Cas. 372 was decided by him on the footing that the original purchase of the lire had been 'a speculation'. It is, perhaps, fair to say that the case stated in Mckinlay's case [1926] 10 Tax Cas. 372 does not appear to contain any basis for a finding that the original purchase was a speculation. It does not appear that that was the intention of the original purchase, so far as the case stated shews. But, however that may be, that was Rowlatt J.'s own view; and on that basis, in my opinion, no criticism could be made of the decision in Mckinlay's case [1926] 10 Tax Cas. 372. Leaving that on one side, and taking Mckinlay's case [1926] 10 Tax Cas. 372 by itself, I call attention to the fact that the circumstances there were very different to the circumstances in the present case. In the present case the intention with which the dollars were bought was as I have stated; and that intention p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the securities of the bank are realised in order to meet withdrawals by depositors, it seems to their Lordships to be quite clear that this is a normal step in carrying on the banking business, or, in other words, that it is an act done in 'what is truly the carrying on' of the banking business. This, it appears to their Lordships, is the more appropriate and satisfactory ground for dealing with the question arising in the present case. This decision shows that the expression arising from business found in section 4(3)(vii) should not be construed narrowly. Various other English decisions have been read to us, but on issues not ad idem with the one we are concerned in this case. To my mind they do not throw any light on the point on which our decision is called for. They can only stimulate the mind, but cannot serve as precedent. In this connection the observations of the Supreme Court in Senairam Doongarmall v. Commissioner of Income-tax [1961] 42 I.T.R. 392; [1962] 1 S.C.R. 257 are pertinent. This is what Hidayatullah J., who delivered the judgment of the court, said: Now, it is necessary to point out that the English cases were decided under a different ..... X X X X Extracts X X X X X X X X Extracts X X X X
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