Appeal from the judgment and order dated December 11, 1961 of the Mysore High Court in I.T.R.C. No.
Owing to the difficulties of the currency situation it was impossible to remit the amount to the head office for quite a long time.
3,97,221/ was blocked and sterilised for the period from the devaluation of the Indian rupee upto the time of its remittance to India.
In terms of Indian currency the said amount became equivalent to Rs.
Thus there was an appreciation of the value of the amount remitted from the Karachi branch and the Bank made a profit of Rs.
5,71,038/ .
1,70,746/ to its Contingencies Reserve Account.
The State Bank of Pakistan granted the permission on July 1, 1953 and the remittance actually took place two days later i.e., on July 3, 1953.
and that all these operations were effected in a new account which was opened and the old balance of Rs.
After making certain deductions, the head office of the Bank transferred a sum of Rs.
3,97,221/belonging to its head office.
G. L. Sanghi and B. R. Agarwal, for the respondent.
After the partition of India in 1947, the currencies of the two dominions of India and Pakistan companytinued to be at par until there was a devaluation of the Indian Rupee on September 18, 1949.
1,73,817/ .
The order of the Income tax Officer was affirmed by the Appellate Assistant Commissioner in appeal.
In its return for the assessment year 1954 55, the Bank claimed that this sum was a capital gain and was number taxable.
675 of 1965.
By his order dated February 9, 1955 the Income tax Officer rejected the claim holding that the said amount of Rs.
The Judgment of the Court was delivered by Ramaswami, J. This appeal is brought, by certificate, from the judgment of the High Court of Mysore dated December 11, 1961 in Income Tax Reference Case No.
M. Hazarnavis, R. Ganapathy lyer and R. N. Sachthey, for the appellant.
On July 1, 1953, the State Bank of Pakistan permitted its remittance to India.
CIVIL APPELLATE JuRISDICTION Civil Appeal No.
13 of 1959.
The exchange ratio between the two companyntries was number determined until February 27, 1951.
As Pakistan did number devalue her rupee, the old parity of the Pakistan and Indian Rupee ceased to exist.
The Bank took the matter in further appeal to the Income tax Appellate Tribunal which rejected the appeal by its order dated November 23, 1956.
In the supplementary statement of the case the appellate Tribunal stated that during the period April 3, 1951 to April 25, 1953 there were dealings between India and Pakistan Offices of the Bank, such as opening of letters of credit, issuing of drafts etc.,
1,70,746/ was a revenue receipt.
In the companytext of these facts the High Court took the view that the appreciation of the value of the money did number arise in the companyrse of the trading operation of the Bank and was number therefore taxable as revenue receipt.
It has been found by the Appellate Tribunal that until April 3, 1951 when the Bank was permitted to carry on business in Pakistan currency it carried on numberforeign exchange business.
On this date it was agreed that a hundred Pakistani Rupees were equivalent to a hundred and forty four Indian rupees.
The respondent hereinafter referred to as the Bank is a public limited companypany carrying on business of banking at it s head office in Mangalore and its branches in various places.
It opened one branch in Karachi on November 15, 1946.
On the date of devaluation of the Indian Rupee the Karachi Branch of the Bank had with it a sum of Rs.
At the instance of the Bank the Income tax Appellate Tribunal referred the following question of law for the determination of the High Court Whether the aforesaid exchange difference of Rs.
Even after such permission was granted and even after the Bank obtained on April 25, 1953 a general licence to carry on business in all foreign currencies the money of the head office was number used for any business in foreign currencies.
13 of 1959.
