| Case ID |
038bda17-b7b4-4ea4-b5a4-77656c63457e |
| Body |
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| Case Number |
CIVIL APPEAL No. 675 OF 1965 |
| Decision Date |
Oct 13, 1966 |
| Hearing Date |
|
| Decision |
The Supreme Court held that the exchange difference of Rs. 1,70,746 received by the assessee could be regarded as capital gains which was not assessable to income-tax. The Court concluded that the appreciation of the money did not arise in the course of any trading operation and was therefore not taxable as revenue receipt. The High Court's decision that the exchange difference was not assessable to income-tax was affirmed, and the appeal was dismissed. |
| Summary |
In the case between the Commissioner of Income Tax and Canara Bank Ltd, the Supreme Court examined the nature of an exchange difference amounting to Rs. 1,70,746. The core issue was whether this amount could be classified as capital gains or revenue receipts for the assessment year 1954-55. The facts revealed that the Canara Bank had a branch in Karachi, which had accumulated a sum of Rs. 3,97,221 before the devaluation of the Indian rupee. After the State Bank of Pakistan permitted the remittance of these funds to India, the amount appreciated significantly, leading to a profit. However, the Supreme Court noted that this profit did not arise from any trading operations of the bank, as the funds were 'blocked' and 'sterilised' for several years, and thus ruled that such an exchange difference was a capital receipt. This ruling is significant for understanding the treatment of foreign exchange gains in banking operations. The decision underscores the distinction between capital profits and revenue receipts, particularly in the context of foreign currency transactions. Legal practitioners should note the implications of this case on future assessments involving similar circumstances. Keywords: capital gains, revenue receipts, foreign exchange, banking operations. |
| Court |
Supreme Court of India
|
| Entities Involved |
Commissioner of INCOME TAX,
Canara Bank Ltd
|
| Judges |
J.C. Shah,
V. Ramaswami,
V. Bhargava
|
| Lawyers |
R.M. Hazarnavis,
R. Ganapathy Iyer,
R.N. Sachthey,
A.K. Sen,
G.L. Sanghi,
B.R. Agarwal
|
| Petitioners |
Commissioner of INCOME TAX
|
| Respondents |
Canara Bank Ltd
|
| Citations |
1967 SLD 115,
(1967) 63 ITR 328
|
| Other Citations |
Davies v. Shell Co. of China Ltd. [1951] 32 Tax Cas 133,
Imperial Tobacco Co. v. Kelly [1943] 25 Tax Cas. 292,
Landes Brothers v. Simpson[1934] 19 Tax Cas 62,
Mckinlay v. H.T. Jenkins & Son Ltd. [1926] 10 Tax Cas 372
|
| Laws Involved |
Income-tax Act, 1961
|
| Sections |
4
|