CANARA BANK LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question presented by this case, stated under section 66(1) of the Income-tax Act, is the assessability to income-tax of profits arising from fluctuations in the exchange rates of foreign currency.

(2.) THE assessee, which will be referred to as the bank, is a bank called the Canara Bank Limited, with its head-office in India and its branches in various places including one opened in Karachi before it became, in the year 1947, part of the Dominion of Pakistan, on the partition of India. Even after such partition, the currencies of the two Dominions on India and Pakistan were at par until there was a deflation of the Indian rupees on September 18, 1949. Pakistan not having devalued her rupee, there was the inevitable disturbances of the parity between the currencies of the two countries and, for various reasons, the exchange ratio between the two currencies was not determined until February 27, 1951, on which date it was agreed that a hundred Pakistan rupees were equivalent to a hundred and forty-four Indian rupees.

(3.) THE relevant portion of the earlier statement of the case is :