1. ' AJMAL MIAN, C.J.--(1) This is an application under Section 66 (1) of the Income-tax Act, 1922, hereinafter referred to as the Act, filed by the applicant/assessee in respect of the assessment year 1972-73 as the Income Tax Department as well as the learned Income Tax Appellate Tribunal disallowed a sum of Rs,48,965 being the amount of additional expenses because of fluctuations in the rate of exchange. The opinion of this Court has been solicited on the following question:- "Whether in the facts and circumstances of the case the Tribunal was right in holding that the sum of Rs,48,965, being the additional amount expended by the Appellant because of fluctuations in the rate of exchange, in making repayment of the foreign currency loans was a Capital Expenditure?"
2. Mr. AA. Shareef, learned counsel for the applicant and Mr. Sohail Hameed holding brief for Mr. Waheed Farooqui, learned counsel for the respondent, have referred to an unreported judgment of a Division Bench of this Court in the case of General Tyre & Rubber Company of Pakistan Limited v.
2. The Commissioner of Income Tax (Civil Reference No,25 of 1979) delivered on 30-1-1989 wherein the Division Bench while dealing with the question that the payment made by the assessee on account of Technical Assistance Fee was an admissible deduction referred to the judgment in the case of Sutlej Cotton Mills v. Commissioner of Income Tax West Bengal, reported in (1979) 116 I T R 1 and quoted with approval the following passage of the above-referred judgment, which reads as follows:- "The law may, therefore, now be taken to be well-settled that where profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency held by it, on conversion into another currency, such profit or loss would ordinarily be trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading asset or as part of circulating capital embarked in the business. But, if on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature."
3. 3 In the instant case, the above principle enunciated in the above-quoted passage will be applicable and, therefore, the answer to the above-quoted question would be that if the applicant had treated the foreign exchange involved as a part of revenue account, it would be an admissible item in trading expenses but if the foreign exchange was treated as a capital asset the loss would be of capital nature.
4. 4 The reference stands disposed of in the above terms with no order as to costs.