DY COMMISSIONER OF INCOME TAX ASSTT Vs. GARDEN SILK MILLS LTD

JUDGEMENT

(1.) AT the time of admission on 19. 07. 2000, the following substantial question of law was framed by the High Court : "is profit on cancellation of forward exchange contract a capital receipt or a revenue receipt ?"

(2.) AFTER hearing the learned Advocates for the parties, the Court feels that the controversy between the parties is best reflected by the following reformulated substantial question of law :

(3.) THE Assessment Year in question is 1993-94, relevant accounting period being Financial Year ended on 31. 03. 1993. During course of assessment proceedings u/s. 143 (3) of the Income Tax Act, 1961 (the Act), the Assessing Officer having noted the fact of assessee having received sum of Rs. 68,66,673/- on cancellation of forward foreign exchange contract (hereinafter referred to as "the contract") called upon the assessee to explain as to why the said amount should not be brought to tax. The explanation tendered by the assessee has been summarized in the assessment order in paragraph Nos. 4. 4 (a) to 4. 4 (c ). The Assessing Officer has thereafter treated the surplus realised on cancellation of the contract as not liable to tax by observing as under :