COMMISSIONER OF INCOME TAX Vs. JAGATJIT INDUSTRIES LTD.

JUDGEMENT

(1.) COMMON question which arises for consideration in all these appeals filed by the Revenue is as to whether the receipt on account of exchange rate fluctuation of foreign exchange receipt is a capital receipt or revenue receipt irrespective of the source of the said income. An alternate plea was also taken by the Revenue to the effect that 22 per cent of the funds were utilized for working capital, which is in a nature of circulating capital and therefore, 22 per cent of the gain on account of exchange rate fluctuation is to be held as revenue receipt.

(2.) THE assessee is the same in all these appeals and the aforesaid issue arose in various assessment years, under the following facts and circumstances.

(3.) THE assessee is a multi -product company engaged in the business of alcoholic beverages, malted milk food, dairy products, etc. During the asst. yr. 1997 -98, the assessee company had issued 2,52,10,000 equity shares overseas by way of GDR and collected USD 1,57,17,000 as share capital. It was equivalent to Rs. 55 crores (net of issue expenses) at the conversion rate of Rs. 35 per dollar. The share capital as raised had to be mandatorily retained overseas and was to be repatriated into the country as and when required for approved end uses. Therefore, the entire share capital of Rs. 55 crores was kept in fixed deposits with Standard Chartered Bank in UK and funds were repatriated out of the share capital as and when required for implementing various projects approved by the Ministry of Finance and Ministry of Industry. The assessee company as required by the Ministry of Finance, Government of India had informed them at the time of issue of share capital, the end use of the share capital in acquisition of fixed assets at 79 per cent and general corporate uses at 21 per cent. The assessee company had also filed the audited statements of share capital repatriated at various intervals and used in the above -said manner to the Ministry of Finance, Government of India. The fixed deposits kept in U.K. and made out of share capital received in US dollars had to be shown in Indian rupees in the appeal has accounted for in its balance sheet gain arising from exchange rate fluctuation of foreign currency.