UNIVERSAL RADIATORS, COIMBATORE versus COMMISSIONER OF INCOME TAX, TAMIL NADU

Citation: [1993] 2 S.C.R. 775 · Decided: 30-03-1993 · Supreme Court of India · Bench: T.K. THOMMEN · Disposal: Appeal(s) allowed

Judgment (excerpt)

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UNIVERSAL RADIATORS, COIMBATORE 
A 
v. 
COMMISSIONER OF INCOME TAX, TAMIL NADU 
)'-
MARCH 30, 1993 
[DR. T.K. THOMMEN AND R.M. SAHA!, JJ.) 
B 
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Income Tax Act, 1961 : Sections 4 and 10(3). 
Assessee-Manufacturer of automobile radiators-Copper ingots 
booked from America-To be rolled in Bombay as and sheets and despatched c 
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to assessee for manufactu~Ship carrying goods seized by Pakistatt-ln-
surance company paying value of goods in do/lars-Devalua_tion. of Indian 
rnpee-171e difference of the Indian rnpee before devaluation and that 
received. after devaluation-Excess held a capital receipt-Not business 
receipt-Receipt of casual nature-Sterilization of stock in trade. 
D 
Words and Phrases-Meaning of 'lnconie'-'Casuar. 
The appellant-assessee a manufacturers of radiators for 
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automobiles booked copper ingots from a corporation In the United States 
of America for being brought to Bombay where it was to be rolled into E 
strips and sheets and then despatched to the assessee for being used for 
manufacture. While the Ingots were at sea, hostilrtles broke out between 
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India and Pakistan and, the vessel carrying the goods was seized by the 
authorities in Pakistan. The claim of the assessee for the price paid by it 
for the goods was ultimately settled in its favour by the insurer in America. 
F 
The Indian Rupee in the meanwhile had been devalued and, there-
fore, in terms of rupees the appellant firm got Rs. 3,43,556/- as against 
their payment of Rs. 2,00,164/- al the old rates. The dilTernece was credited 
to profit on devaluation in the Profit and Loss Account. The claim of the 
appellant that the difference being a causal receipt and non-recurring in G 
nature, and as such was not liable to tax, was not accepted by the Income· 
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Tax Officer. 
The Appellate Assistant Commissioner rejected the appeal of the 
assessee, being of the opinion that the receipt was one which did not arise 
directly from carrying on business by the assessee but was the incidental H 
775 
776 
SUPREME COURT REPORTS 
[1993] 2 S.C.R. 
A 
to it, and not finding any merit in the submission that the ultimate 
realisation was in the nature of capital gains and not revenue recipt. 
In further appeal by the assessee, the Tribunal held that when the 
goods were seized by the Pakistan authorities "the character of the goods 
changed and it became sterilized and, therefore, it ceased to be stock-in-
B trade of the assessee, that the devaluation surplus was in nature of capital 
receipt and not a profit made by the assessee in the course of business, 
that the money which came to the assessee was as a result of the settlement 
of the insurance claim and, therefore, the profit that resulted from it could 
not be considered in the normal course of business. 
c 
The High Court in its advisory jurisdiction at the instance of the' 
Department negatived the claim of the assessee for two reasons, one the 
difference in the cost price and the sale price, and the other that it was 
revenue receipt, and did not agree with the Tribunal as according to it if 
the assessee had got the goods imported into India and sold ihem it would 
D have got higher amount as a result of devaluation, and held that there 
could be no dispute that the assessee was liable to pay tax on the difference 
of the sale price and the cost. It further held that the nature of the amount 
which came in the hands of the assessee was a revenue receipt, and did not 
agree that the payment ·made to the assessee was otherwise than for 
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business, as the whole transaction was part and parcel of the business 
carried on by the assessee and could not be described as extraneous to it. 
In the assesse's appeal to this Court, on the question whether the 
excess amount paid to the assessee due to fluctuation in exchange rate was 
taxable or not. 
F 
Allowing the appeal, this Court, 
HELD : 1. The word 'income', ordinarily in normal sense, connotes 
any earning or proi1t or gain periodically, regularly or even daily in 
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whatever manner and from whatever source. It is thus a word of very wide 
import. Section 2(24) of the Income Tax Act is legislative, recognition of 
its elasticity. Its scope has even widened from time to time by extending it 
to varied nature of income. Even before it was defined as including profits, 
gains,.dividends and contributions received by a trust it was held to be a 
word, 'of broadest connotation' which could not be 'understood in 
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