- (1.) The original appellant Bank of Cochin Ltd., has been amalgamated with the State Bank of India and on an oral application of the appellant for substitution and with the consent of the respondent, this application was allowed and the amendment was directed to be effected.
(2.) This appeal arises by special leave against the judgment and decision of the High Court of Kerala at Ernakulam dated 25th January, 1973 in Income-tax Reference No. 31 of 1971 (reported in 1973 Tax LR 11099).
(3.) The assessee, previously the Bank of Cochin Ltd., a banking company, as part of its banking business, had been purchasing cheques, payment orders, mail transfers, demand drafts, bills and other negotiable instruments drawn in foreign currencies and sometimes foreign currencies themselves from its clients. These foreign exchange assets were subsequently sold or encashed through the assessee's correspondent-banks in the foreign countries concerned and the proceeds credited to the current account of the assessee with the correspondent-bank concerned. Consequent on the devaluation of the Indian rupee on 6th June, 1966, the amounts credited to the assessee in the foreign banks registered an increase of Rs. 4,65,515/-. The excess realisation on devaluation was treated by the Income-tax Officer as the income of the assessee during the accounting year ending 31st December, 1966, rejecting the assessee's plea that the profit was in the nature of a windfall. There was an appeal from the said decision to the Appellate Assistant Commissioner. The 'Appellate Assistant Commissioner rejected the assessee's contention. There was a further appeal to the Appellate Tribunal. The Tribunal also did not accept the assessee's submission. There was a further contention that as on the last day, 31st December, 1966, of the accounting year relevant to the assessment year 1967-68, the assessee had valued the Government securities held by it at the market price and as the market price of the securities on that date was less than the cost price, the difference amounting to Rs. 52,935/- was taken as loss arising from the valuation of the closing stock of securities. In the return filed for the assessment year 1967-68, a claim was made to deduct the above loss. As there. was no actual loss arising on the sale of securities and as there was no debit to the profit and loss account of the alleged loss and as the method of valuation adopted for this year was not in accordance with the method of accounting regularly employed by the assessee, the Income-tax Officer disallowed the loss. On appeal, the Appellate Assistant Commissioner as well as the Appellate Tribunal came to the same conclusion.;