TMI Blog1994 (3) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ilised by the assessee-company for the purchase of rights shares after obtaining the approval of the Reserve Bank of India. The balance of the accumulated amount in the current account was invested by the assessee-company in call deposits in banks in the United Kingdom when the balance in the current account became sufficiently large. The interest received on call deposits was also credited to the current account and utilised for investment in rights shares. This procedure had been followed by the assessee-company right from the year, 1947, till 1966. For the assessment year 1967-68 for which the previous year was the calendar year 1966, the assessee was compelled to repatriate the balance in the above current account as well as in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt not liable to be included in the total income. On appeal, the Commissioner of Income-tax held on the facts that the shares were held by the assessee in the United Kingdom on investment account, negativing the finding of the Income-tax Officer that the assessee-company was a dealer in shares. The Commissioner of Income-tax further held that there was no dispute that the accumulation of funds in the foreign country was not as a result of realisation of those investments but it represented the accumulation of dividend income from those shares. He, however, held that the profit arising as a result of appreciation in the value of foreign currency held by the assessee-company on conversion into Indian currency was liable to be assessed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of rights shares. The amounts so accumulated for investment purposes have been brought back to India at the instance of the Reserve Bank of India during the relevant previous year. On account of devaluation of the rupee in the relevant previous year, the assessee has received in India Rs. 1,72,676 extra, that is to say, over and above the book figures. We have to consider whether this represents a revenue receipt or a capital receipt. If it is the former it will have to be treated as the income of the assessee-company liable to tax under the Income-tax Act, 1961. In this connection, it is necessary to note that in view of the facts as found it is clear that the amounts which were lying in the banks in the United Kingdom were not trading a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk did not carry on any business in foreign currency and even after it was permitted to carry on business in Pakistan currency, it carried on no foreign exchange business. The amount in question, was lying idle in the Karachi branch and was not utilised in any banking operation. On repatriation of this amount to India, in view of the differences in the value of Indian and Pakistan currencies during the relevant previous years the assessee-company made a profit of Rs. 1,73,817. The question was whether this was a revenue receipt of the assessee. The Supreme Court, on examination of facts, held that the appreciation in the value of the money did not arise in the course of any trading operation. Since the assessee was a bank, the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the amounts which were held in foreign currency were held by the assessee on capital account or on revenue account. It remanded the matter to the Tribunal for deciding this question. These decisions have been considered by the Calcutta High Court in the case of Indo-Burma Petroleum Co. Ltd. v. CIT [1982] 136 ITR 251. Sabyasachi Mukharji J. (as he then was) after considering the above judgments has said that if on account of exchange fluctuations profits arise in the course of business transactions, the excess receipts on account of conversion of one currency into another would be revenue or business receipts. But if such profit does not come in by way of business of assessee, the profit would be capital. The true test is not the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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