Content Provider | Supreme Court of India |
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e-ISSN | 30484839 |
Language | English |
Access Restriction | NDLI |
Subject Keyword | Taxable Profits |
Content Type | Text |
Resource Type | Law Judgement |
Jurisdiction | India |
Case Type | Appeal |
Court | Supreme Court of India |
Disposal Nature | Appeal Dismissed |
Headnote | Taxable Profits - Computation of taxable property, when an assessee converts his capital assets received as gift, into stock-in-trade and starts dealing in them, explained. During the assessment year 1962-63, the corresponding accounting year being the financial year ending 31st March, 1962, in respect of goods partly of raw materials and partly of semi-finished needles gifted by their collaborators in West Germany, the respondent assessee made entries in their books of account for the first time on 30th September 1961, as follows : Rs. 44,448.20 debited to the account of 'wire and strip' and credited to the 'wire and strip Gift Account' and Rs. 30,000 debited to the account of 'Semi-processed needles' and credited to the 'Semi-processed Needles Gift Account'. The assessee utilised these goods in the manufacture of finished products and sold the same in the market and the sale proceeds received by the assessee were credited in the trading account maintained in the books account of the business, since they represented revenue receipts arising from the sale of the finished products. On 31st March 1962, the assessee closed the above two gift accounts by transferring the respective sums of Rs. 44,448.20 and Rs. 30,000/- to the credit of the 'Capital Reserve Account' and debited the aggregate sum of Rs. 74,448.20 to the trading account by making corresponding contra credit entries in the accounts of 'wire and strip' and 'Semiprocessed Needles'. The net effect of these entries was that the profit of the assessee was reduced by Rs. 74,448.20. The income-tax officer, in the course of the assessment of the assessee to income tax for the assessment year 1962-63 took the view that the debit of Rs. 74,448.20 was wrongly made in the trading account as on 31st March, 1962 since no monies were expended by the assessee in acquiring the raw-materials and semi-finished needles, but they were received by way of gift from the West German Collaborators and hence no amount was deductible in respect of the value of these goods. The same view was taken by the Appellate Assistant Commissioner in appeal and on further appeal, the Tribunal also affirmed the same view. But the High Court on a reference at the instance of the assessee, held that the value of these goods could not be treated as revenue receipt because they had been received by way of gift and in any event, even if they constituted revenue receipt, they could "in no sense be income" since they were taken out of the ambit of taxability by sub-section (3) of section 10 of the Income Tax Act, 1961. The High Court accordingly answered the questions referred by the Tribunal in favour of the assessee and against the Revenue. The Revenue thereupon brought the present appeal with special leave. |
Judge | Honble Mr. Justice P.N. Bhagwati |
Neutral Citation | 1978 INSC 239 |
Petitioner | Commissioner Of Income Tax, Patiala |
Respondent | M/s. Groz Backert Saboo Ltd. |
SCR | [1979] 2 S.C.R. 371 |
Judgement Date | 1978-11-22 |
Case Number | 1482 |
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