Sen, J. - (1.) The facts found and/or admitted in this reference under Section 256(1) of the I.T. Act, 1961, are of short compass. The Calcutta Jute Agency (P.) Ltd., Calcutta, the assessee, carries on business in purchase and sale of jute. Under an agreement dated 3rd April, 1963, one W.F. Ducat & Co. had been engaged to carry on the business of the assessee as the latter's manager and/or managing agents. Acting on behalf of the assessee, W.F. Ducat & Co. entered into a contract for purchase of jute in London from Pakistan in 1965, and opened a letter of credit there covering the price of the said jute in favour of the intending seller. Thereafter, hostilities broke out between India and Pakistan, the contract could not be performed and the letter of credit remained unoperated. There was devaluation of the Indian rupee in June, 1966, and by reason of the unoperated letter of credit, W.F. Ducat & Co. received a sum of Rs. 1,52,710 in excess over the amount originally deposited by them in rupees. This surplus was passed on to the account of the assessee and included by the assessee in its own profit and loss account in the accounting year ending 31st March, 1968. In its assessment for the said accounting year, being assessment year 1968-69, the ITO treated this surplus as a trading receipt and added the same to the total income of the assessee.
(2.) Being aggrieved by this assessment, the assessee preferred an appeal to the AAC. It was contended before the AAC that this surplus was not a trading receipt but a receipt of a casual and non-recurring nature and as such was not taxable. It was submitted that the assessee was not a dealer in foreign exchange and did not even carry on any business itself. It was further contended that the intended contract had been frustrated due to factors beyond the control of the assessee. The AAC, however, held that the surplus arose in the hands of the assessee in the course of the business carried on by W.F. Ducat & Co. on behalf of the assessee and, therefore, the amount was taxable. He confirmed the order of the ITO.
(3.) Being aggrieved thereby the assessee preferred a further appeal before the Income-tax Appellate Tribunal. The assessee reiterated its aforesaid contention before the Tribunal and in support thereof cited a decision of this court in the case of Sutlej Cotton Mills Ltd. v. C1T. The revenue sought to distinguish Sutlej Cotton Mills on facts and, in turn, cited M. Shamsuddin & Co. v. CIT in support of their contentions to the contrary.;