| Case ID |
1690043a-7ab5-4cd9-9ab0-65a7933b07d0 |
| Body |
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| Case Number |
Income-tax Reference No. 4 of 1970 |
| Decision Date |
May 03, 1978 |
| Hearing Date |
Jan 18, 1978 |
| Decision |
The court affirmed that the sum of Rs. 60,000 received by the respondent was a capital receipt as it compensated for the loss of the sole-selling agency rights. The Income-tax Appellate Tribunal's majority view was supported, which opined that the payment was not taxable income but rather compensation for the loss of a capital asset. The judgment emphasized that the nature of the receipt must be assessed based on the facts and circumstances surrounding the payment, and not simply on the title or form of the transaction. The court distinguished this case from others where payments were deemed income, highlighting that the termination of the agency significantly affected the respondent's trading structure. The decision outlines the principles governing capital versus revenue receipts, reinforcing that compensation for loss of a capital asset should be treated as a capital receipt. |
| Summary |
In the case of Income-tax Reference No. 4 of 1970, the Sindh High Court addressed the nature of a payment made to Forbes Campbell & Co. Ltd. for the termination of their sole-selling agency. The court ruled that the Rs. 60,000 received was a capital receipt, not taxable as income. This decision was based on the understanding that the payment compensated the respondent for the loss of a capital asset, specifically their sole agency rights. The case highlighted the importance of examining the true nature and purpose of payments in tax law, establishing that what is received for loss of capital is a capital receipt, while payments received as profit in trading transactions are taxable income. The judgment referenced key precedents to clarify the distinction between capital and revenue receipts, ensuring clarity in future tax assessments related to similar compensatory payments. |
| Court |
Sindh High Court
|
| Entities Involved |
Forbes Campbell & Co. Ltd.,
Exide Batteries of Pakistan Limited
|
| Judges |
MAHMUD,
ZAFFAR HUSSAIN MIRZA
|
| Lawyers |
Mansoor Ahmad Khan,
G. M. Qureshi
|
| Petitioners |
COMMISSIONER OF Income Tax (EAST), KARACHI
|
| Respondents |
MESSERS FORBES CAMPBELL & Co. LTD.
|
| Citations |
1978 SLD 1 = 1978 PLD 1047
|
| Other Citations |
Kettlewell Bullen & Co. Ltd. v. Commissioner of Income-tax, Calcutta (1964) 53 I T R 261,
Gillanders Arbuthnot & Co. Ltd. v. Commissioner of Income-tax, Calcutta (1964) 53 I T R 283,
Godrej & Co. v. Commissioner of Income-tax, Bombay City (1959) 37 1 T R 381,
Commissioner of Income-tax, Bengal v. Shaw Wallace & Company A I R 1932 P C 138,
Commissioner of Income-tax, Hyderabad, Deccan v. Wazir Sultan & Sons (1959) 36 I T R 175
|
| Laws Involved |
Income Tax Act, 1922
|
| Sections |
10
|