The claim of the appellant that the difference being a casual receipt and number recurring in nature, it was number liable to tax, was number accepted by the Income Tax Officer.
But he did number find any merit in the submission that the ultimate realisation was in nature of capital gains and number revenue receipt.
The necessary nexus between ingots and radiators which companyld have resulted in income from ingots never came into being.
In appeal the Appellate Assistant Commissioner was of opinion that the receipt was one which did number arise directly from carrying on business by the assessee but was incidental to it.
It further found that the money which came to the assessee was as a result of the settlement of the insurance claim and, therefore, the profit that resulted from it companyld number be companysidered to have arisen in numbermal companyrse of business.
From the Judgment and Order dated 25.7.1979 of the Madras High Court in Tax Case No.
The income thus should have accrued out of the business carried on by the assessee.
The difference was credited to profit on devaluation in the Profit and Loss Account.
When the matter came to the High Court, in its advisory jurisdiction, at the instance of the department, on the following questions of law, Wether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law, in holding that the devaluation surplus earned by the assessee companysequent to the settlement of the claim by the insurance companypany is number assessable as revenue receipt for the assessment year 1967 68 ?
An income directly or ancillary to the business may be an income from business, but any income to an assessee carrying on business does number become an income from business unless the necessary relationship between the two is established.
The Judgment of the Court was delivered by M. SAHAI, J. Legal issues that arise for companysideration in this appeal, directed against the decision of the High Court in Commissioner of Income Tax, Tamil Nadu v. Universal Radiators, 1979 120 ITR 906 on questions of law referred to it in a reference under the Income Tax Act in brief the Act are, if the excess amount paid to the assessee due to fluctuation in exchange rate was taxable either because the payment being related to trading activity it companyld number be excluded under Section 10 3 of the Act even if it was casual and number recurring in nature or it was stock in trade, therefore, taxable as revenue receipt or in any case the companypensation for the loss of goods companyld number be deemed anything but profit.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
Shorn of details the assessee, a manufacturer of radiators for automobiles booked companyper ingots from a companyporation in the United States of America for being brought to Bombay where it was to be rolled into strips and sheets and then despatched to assessee for being used for manufacture.
54/76 Reference No.
It did number agree with the Tribunal as according to it if the assessee had got the goods imported into India and sold them it would have got higher amount as a result of devaluation.
Ramamurthy, P. Parmeswaran NP , Ranbir Chandra NP , V. Ratnam and Ms. A. Subhashini NP for the Respondent.
Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the profit earned by the assessee on account of devaluation of Indian Currency was number in the companyrse of carrying on of the business or incidental to the business ?
While the ingots were at sea, hostilities broke out between India and Pakistan and, the vessel carrving the goods was seized by the authorities in Pakistan.
35/76.
5897 of 1983.
Meanwhile the Indian Rupee had been devalued and, therefore, in terms of rupees the appellant firm got Rs.
The High Court thus negatived the claim of assessee for two reasons, one, the difference in the companyt price and the sale price, and the other, that it was revenue receipt.
3,43,556 as against their payment of Rs.
The claim of the assessee for the price paid by it for the goods was ultimately settled in its favour by the insurer in America.
A. Ramachandran and Janki Ramachandran for the Appellant.
What was lost on the seas was number raw material, but something which was capable of being companyverted into raw material.
2,00,164 at the old rate.
