assessee in appeal is Fabindia Overseas (P.) Ltd., company incorporated under Companies Act, 1956. year of assessment involved is 1980-81, for which previous year ended on 31-12-1979. As in past, in year under consideration, assessee carried on business of export of handloom products, besides marginal domestic sales. 2 to 10. [These paras are not reproduced here as they involve minor issues.] 11. As already stated, assessee carries on business of export of handloom products. Admittedly, value of goods exported is first calculated in rupees for purposes of crediting sales in books of account of assessee, though export invoices are in relevant foreign currency of country, to which goods are exported. export invoices are then sent through banking channels for realisation of price of goods exported from buyers. Naturally, buyers pay money to bank concerned in relevant foreign exchange and after transmission from collecting bank, amount mentioned in invoice bills is received by assessee through banking channels in India in rupees, that amount being credited to assessee's account in India. Due to exchange fluctuation, amount finally received in rupees may be in excess or short of amount shown by assessee in its books at time of despatch of goods. In year under consideration, assessee, however, had net surplus of Rs. 4,04,972. assessee for first time raised contention before Commissioner (Appeals), based on ratio of decision of Calcutta High Court in case of Indian Leaf Tobacco Development Co. Ltd. v. CIT [1982] 137 ITR 827, that said net surplus of Rs. 4,04,972 was capital receipt not chargeable to tax. Commissioner (Appeals), after referring to ratio of decision of Calcutta High Court and distinguishing it and relying on ratio of decision of Delhi High Court in case of Fabindia v. CIT [1981] 130 ITR 143 and of Kerala High Court in M. Shamsuddin & Co. v. CIT [1973] 90 ITR 323, has held that decision of Delhi High Court in Fabindia's case was on all fours to present case and so said net surplus of Rs. 4,04,972 was revenue and not capital receipt by observing as under: " only difference in facts is that whereas in case decided by Delhi High Court, exchange fluctuation was on account of act of Government, namely, devaluation of Indian rupee, in assessee's case it is on account of normal market and economic forces which govern exchange rates between different currencies. This, in my view, would not make any material difference so long as profit is arising during course of normal carrying on of trading activities and is directly or indirectly linked with normal trading or business activity of assessee. What assessee credited in sales account, represented expected sale price in Indian rupees, which was expected to be realised from foreign buyers. amount which has actually been realised, on other hand, represents actual sale price of goods realised in respect of export sales. difference between two amounts, which though attributable to fluctuations in exchange rates, is nothing else but integral part of sale proceeds of goods exported. It is, therefore, not possible to de-link it from rest of sale proceeds and to treat it as separate entity which has nothing to do with trading activity of assessee. assessee's real profit from export can only be worked out by taking into account actual sale price realised in rupees and actual cost. I, therefore, find myself unable to accept finding of Calcutta High Court that chunk of profits, which is attributable to exchange fluctuations, is capital receipt, which has no connection with trading activity of assessee and which does not arise from such activity. " 12. In appeal before Tribunal, representative for assessee, Mr. Ganeshan took us through decision of Calcutta High Court in Indian Leaf Tobacco Development Co. Ltd.'s case. According to Mr. Ganeshan, decision of that case squarely applied in present case before Tribunal. said Calcutta High Court decision in Indian Leaf Tobacco Development Co. Ltd.'s case, according to Mr. Ganeshan, lays down that where surplus arises due to fluctuation in exchange rate, true test to find out if such surplus is assessable is to find out if it arose out of any trading activity. It must be result of trading activity of assessee or it must arise or result from trading activity of assessee. Merely because holder of currency gets something more than what it would have got otherwise, would not transform accretion into trading profit unless holding or dealing in foreign exchange of particular currency was trading activity of assessee concerned. In light of this test, Mr. Ganeshan has argued that since invoice bills were raised by assessee in foreign exchange and amount in question was recovered by bank concerned from buyer in foreign currency, appreciation of currency at time of conversion or repatriation to India has nothing to do with trading activity of assessee inasmuch as assessee was not dealer in foreign exchange. profit or excess amount realised arose on account of assessee holding said currency and it arose at time when foreign currency was realised from buyers and so it was capital and not revenue receipt. tests, according to Mr. Ganeshan, to be considered are: (1) whether accretion or profit of excess amount realised is as result of any trading activity of assessee; (2) since there is profit in present case, when did this profit arise; and (3) is it at time of appreciation or depreciation of currency or at time of conversion or repatriation. 13. These arguments are controverted by departmental representative, w h o has urged that decision in case of Indian Leaf Tobacco Development Co. Ltd. is distinguishable on facts. case over there proceeded on findings categorically recorded by Tribunal that amount of profit in question represented profit on exchange. It was not profit due to fluctuation or escalation of price in respect of export sales. present case, according to departmental representative, was case of profit due to fluctuation or escalation in respect of price of export sales. decisions of Kerala High Court in M. Shamsuddin & Co.'s case and of Delhi High Court in Fabindia's case were on all fours. 14. We have given consideration to above arguments. In M. Shamsuddin & Co.'s case, facts are that for cashew kernels exported by assessee-firm and in respect of forward contracts, price used to be fixed in dollars and, at time of payment, assessee would receive rupee equivalent of price, as in present case. On account of such receipt by assessee after devaluation of Indian currency on 6-6-1966, assessee earned profit of Rs. 2,54,862, which assessee claimed was receipt of earned profit of Rs. 2,54,862, which assessee claimed was receipt of casual nature. tax authorities and Tribunal held that amount was taxable revenue receipt. Kerala High Court has upheld decision of Tribunal by holding that result of devaluation was that assessee became entitled to receive larger price in terms of rupees for his goods and that was directly in course of trade and constituted trading profit. 15. In Fabindia's case, facts before Delhi High Court were that assessee in accounting period relevant to assessment year 1967-68 exported cloth to England and America. exported goods having been valued at pound 723 to England and $ 1561 to United States of America before 6-6- 1966. On that date, Indian rupee was devalued. result was that company received in terms of rupees sum of Rs. 26,757 as price of goods sold by it instead of Rs. 16,998, which it would have received had there been no devaluation. tax authorities and Tribunal had held that excess amount realised was not capital receipt, but taxable revenue receipt. Tribunal for coming to said conclusion had observed that surplus or excess was integral part of sale transactions which was routine day to day operation of carrying on of assessee's business. It had nothing to do with permanent framework or fixed apparatus or structure of assessee's business. assessee then took matter to Delhi High Court who have agreed with Tribunal by observing that excess amount received by assessee was excess price received by it in respect of sale of its stock-in-trade. It was integral part of routine operations of assessee's business. It is not assessee's case that this amount had been segregated or that it had been sterilised or utilised in any other manner such as, for example, for capital investment or otherwise. Recently, in case of Sutlej Cotton Mills Ltd. v. CIT [1979] 116 ITR 1, Supreme Court, after reviewing earlier decisions, has summarised position thus: " law [is]... well settled that where profit or loss arises to assessee on account of appreciation or depreciation in value of foreign currency held by it, on conversion into another currency, such profit or loss would ordinarily be trading profit or loss if foreign currency is held by assessee on revenue account or as trading asset or as part of circulating capital embarked in business.... " Tribunal, therefore, came to right conclusion. 16. Keeping in mind ratio of above decisions, let us come to present case. lie in very narrow compass. main business of assessee is to export handloom products. assessee, while exporting goods, records in its books sale price in rupees. Since goods are exported, assessee draws invoice bills in foreign currency of country to which goods are exported. invoices are sent to banking channel for realisation from buyers concerned. After recovery from buyers, amount is held by banking channel on behalf of assessee as trading asset or as part of circulating capital embarked in day-to-day business carried on by assessee. amount of invoice bills is ultimately received by assessee in rupees. amount so received is credited in books of assessee, resulting in above profit of Rs. 4,04,972. Since above profit has arisen to assessee on account of appreciation in value of foreign currency held by it on conversion into another currency, such profit is trading profit, because foreign currency is held by assessee on revenue account or as trading asset or as part of circulating capital embarked in business, as laid down by Supreme Court in case of Sutlej Cotton Mills Ltd. profit in question has, therefore, been correctly held by Commissioner (Appeals) to be taxable revenue receipt and not capital receipt. 17. We now come to decision of Calcutta High Court in case of Indian Leaf Tobacco Development Co. Ltd. There, High Court has clearly recorded at end of pages 836 and 837 that " We must emphasise that in this case Tribunal has categorically made finding that amount represented profit on exchange. It is not profit due to fluctuation or escalation of price in respect of export sales. " decision by High Court has, therefore, been rendered in light of those facts. facts in present case, as brought out above, are entirely different. They are similar to those, which were before Kerala High Court in M. Shamsuddin & Co.'s case and Delhi High Court in Fabindia's case. It may be interesting to mention at this stage that their Lordships of Calcutta High Court in Indian Leaf Tobacco Development Co. Ltd.'s case, at page 842, have distinguished decision of Kerala High Court in case of M. Shamsuddin & Co., after recording facts in that case, which are similar to facts in appeal before us, Calcutta High Court next recorded decision of Kerala High Court in M. Shamsuddin & Co.'s case and then distinguished that decision by observing as under: " ...On reference, High Court, agreeing with Tribunal, held that as result of devaluation assessee became entitled to receive larger price in terms of rupees for his goods and that was directly in course of trade and constituted trading profit. We must first emphasise that this was, as we have indicated, profit due to escalation of price and realisation of enhanced price, and was not profit on exchange, as has been found in instant case before us. Furthermore, Division Bench of Kerala High Court relied mainly on ratio of Mysore High Court in case of Hindustan Aircraft Ltd. v. CIT [1963] 49 ITR 471, decision which we have discussed in decision of Indo-Burma Petroleum Co. Ltd. v. CIT [1982] 136 ITR 251 (Cal.). Reliance was also placed on decision in case of CIT v. Universal Radiators [1979] 120 ITR 906 (Mad.). There Court treated enhanced price as really, in facts found by court, profit due to escalation of price and not as profit on exchange as such. Further, it appeared that this question was not specifically adverted to by Court. " [Emphasis supplied] As already stated above, present case before us is like one before Kerala High Court in M. Shamsuddin & Co.'s case, namely, one pertaining to profit due to escalation of price and realisation of enhanced price and was not profit on exchange, as before Calcutta High Court in Indian Leaf Tobacco Development Co. Ltd.'s case. 18. We may also add that Calcutta High Court in Indian Leaf Tobacco Development Co. Ltd.'s case has also distinguished decision of Delhi High Court in Fabindia's case by observing that: " Reliance was also placed on observations of Delhi High Court in case of Fabindia v. CIT [1981] 130 ITR 143. There also Court treated excess amount as business profit and assessable as such. But this question was not directly adverted to. " 19. To sum up, short question to be addressed by us, in present case, is as to whether profit in present case, which has arisen to assessee on account of appreciation in value of foreign currency held by it on conversion into other currency, would be treated as trading profit if foreign currency is held by assessee on revenue account or as trading asset or as part of circulating capital embarked in business, as laid down by Supreme Court in case of Sutlej Cotton Mills Ltd. Keeping in mind that test, if we come to facts of present case, profit in question is taxable revenue receipt because foreign currency was held by assessee on revenue account or trading asset or as part of circulating capital embarked in business and not on capital account. order of Commissioner (Appeals), in this behalf, is, therefore, correct. 20. In result, appeal by assessee is partly allowed. " ...The purpose of fiction set up by Explanation [to section 41(2)] is to give full effect to first fiction in main paragraph of sub-section, viz., that what is in fact capital receipt must be regarded as business, income and be chargeable to income-tax as such. That fiction cannot be given effect to unless both receipt of money as well as business whose income it is regarded to be, came about and existed in same account year, in respect of which assessment is made... " *** FABINDIA OVERSEAS (P) LTD. v. INSPECTING ASSISTANT COMMISSIONER