| Case ID |
2a48fc6d-cec7-4470-8f80-b8ffcc6d456a |
| Body |
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| Case Number |
IT REFERRED CASE No. 14 OF 1960 |
| Decision Date |
Jun 29, 1962 |
| Hearing Date |
|
| Decision |
The case was decided in favor of the revenue. The court held that the gains resulting from the devaluation of the Indian rupee were liable to tax as they arose from the business activities of the assessee. The court found that the receipts in question were not casual and non-recurring, as they were part of the business operations of the assessee. The significant point was that the increase in the value of the receipts due to the devaluation of the currency did not exempt those receipts from tax under Section 4(3)(vii) of the 1922 Act. The decision emphasized the definition of business, which includes any trade or commerce, and clarified that even a single transaction could constitute business for tax purposes. |
| Summary |
In the case of Hindustan Aircraft Ltd. v. Commissioner of Income Tax, the Mysore High Court addressed the tax implications of foreign currency transactions arising from business activities. The assessee, Hindustan Aircraft Ltd., was engaged in assembling and overhauling aircraft and received payments in U.S. dollars from foreign clients. Following the devaluation of the Indian rupee, the value of these dollar holdings appreciated, leading the Income Tax Officer to assess the gain as taxable income. The court ruled that the gains were not merely a windfall but were inherently tied to business operations, emphasizing the importance of understanding receipts as part of the business's income. This case underscores the need for clarity in tax law regarding foreign currency transactions and their treatment under the Income Tax Act. The court's decision is pivotal for similar cases where foreign exchange fluctuations impact business income, reinforcing the principle that gains from currency appreciation are taxable when they stem from business activities. |
| Court |
Mysore High Court
|
| Entities Involved |
Commissioner of Income Tax,
Hindustan Aircraft Ltd.
|
| Judges |
K.S. Hegde,
Mir Iqbal Husain
|
| Lawyers |
K.R. Ramamani,
S. Suryanarayana Rao,
D.M. Chandrasekhar
|
| Petitioners |
Hindustan Aircraft Ltd.
|
| Respondents |
Commissioner of Income Tax
|
| Citations |
1963 SLD 423,
(1963) 49 ITR 471,
(1963) 8 TAX 211
|
| Other Citations |
Imperial Tobacco Company (of Great Britain and Ireland) Ltd. v. Commissioner of Inland Revenue [1943] 25 Tax Cas. 292,
Canara Bank Ltd. v. CIT [1963] 47 ITR 529,
CIT v. Shaw Wallance and Co. [1932] 2 Comp. Cas. 276 (PC),
George Thompson and Co. Ltd. v. Commissioner of Inland Revenue [1927] 12 Tax Cas. 1091,
Green v. Glicksten and Sons Ltd. [1929] 14 Tax Cas. 364,
King v. B.C. Fir and Cedar Lumber Co. [1932] AC 441,
Landes Brothers v. Simpson [1934] 19 Tax Cas. 62,
Mckinlay v. H.T. Jenkins and Sons Ltd. [1926] 10 Tax Cas. 372,
Punjab Co-operative Bank Ltd. v. CIT [1940] 8 ITR 635 (PC),
Raghuvanshi Mills Ltd. v. CIT [1952] 22 ITR 484 (SC),
Senairam Doongarmall v. CIT [1961] 42 ITR 392 (SC)
|
| Laws Involved |
Income Tax Act, 1961
|
| Sections |
10(3)
|