| Case ID |
2bd974d9-1cb2-4fbb-b8a5-d5b1fa2c2394 |
| Body |
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| Case Number |
CASE REFERRED No. 4 OF 1956 |
| Decision Date |
Feb 14, 1958 |
| Hearing Date |
|
| Decision |
The court held that the amount of Rs. 40,000 received by the assessee as compensation for the cessation of the agency business was a capital receipt and not assessable to tax. The ruling emphasized that the nature of the receipt was determined by the context of the agreement being terminated and the impact on the profit-making structure of the business. The court clarified that even if the amount was calculated based on potential profits lost due to the cessation, it did not alter its nature as a capital receipt. The decision was favorable to the assessee, confirming the distinction between revenue and capital receipts in taxation. |
| Summary |
The case revolves around the interpretation of the Income-tax Act, specifically regarding whether a sum received as compensation for the termination of an agency agreement should be classified as a capital or revenue receipt. The case highlights the legal complexities involved in determining the nature of receipts in business transactions. The Supreme Court's ruling clarified that payments received under circumstances that affect the profit-making structure of a business are typically considered capital receipts, which are not subject to income tax. This case serves as a significant reference for taxpayers and legal practitioners dealing with similar issues in taxation law. Keywords: Income Tax Act, capital receipt, revenue receipt, agency agreement, taxation law, legal precedent. |
| Court |
Madras Bench
|
| Entities Involved |
C & Co.,
Chunduri Venkata Reddi
|
| Judges |
Chandra Reddi, Offg., C.J.,
Srinivasachari, J.
|
| Lawyers |
D. Venkatappayya Sastry,
C. Kondaiah
|
| Petitioners |
Chunduri Venkata Reddi
|
| Respondents |
Commissioner of Income Tax
|
| Citations |
1959 SLD 227 = (1959) 35 ITR 87
|
| Other Citations |
CIT v. Shaw Wallace & Co. [1932] L.R. 59 I.A. 206,
CIT v. South India Pictures Ltd. [1956] 29 ITR 910,
Commissioner of India Revenue v. Fleming and Co. [1951] 33 Tax Cas. 57
|
| Laws Involved |
Income-tax Act, 1961
|
| Sections |
4
|