| Case ID |
2e272597-7981-49e5-8d43-d917d17d2886 |
| Body |
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| Case Number |
Income-tax Reference No. 44 of 1986 |
| Decision Date |
Jun 27, 2001 |
| Hearing Date |
|
| Decision |
The Supreme Court upheld the decision of the Tribunal, stating that the amount received by the assessee as liquidated damages was a capital receipt and not taxable as revenue. The court reasoned that the damages were directly linked to the procurement of a capital asset, and thus, the compensation was not in the ordinary course of business but rather a sterilization of the profit-earning source. Therefore, the appeal was dismissed with no order as to costs. |
| Summary |
In the case of Commissioner of Income Tax v. Saurashtra Cement Ltd., the Supreme Court of India addressed the taxation of liquidated damages received by an assessee engaged in cement manufacturing. The Supreme Court ruled that the liquidated damages were compensatory in nature, directly related to the delay in the supply of a capital asset, which in this case was a cement plant. This amount was deemed a capital receipt rather than a revenue receipt, thereby not subject to taxation. The court emphasized that such compensation was linked to the procurement of a capital asset, essential for the profit-making apparatus of the assessee. The ruling affirmed the Tribunal's decision that the amount should not be included in the total income of the assessee for the assessment year 1974-75. This case highlights the distinction between capital and revenue receipts in tax law, providing clarity on how compensation for delay in capital asset procurement is treated under the Income-tax Act. The decision reinforces the principle that receipts directly tied to the acquisition of capital assets are generally considered capital in nature and not taxable as income. |
| Court |
Supreme Court of India
|
| Entities Involved |
Saurashtra Cement Ltd.,
Walchandnagar Industries Limited
|
| Judges |
D.K. Jain, J.,
C.K. Prasad, JJ.
|
| Lawyers |
R.P. Bhatt,
H.R. Rao,
B.V. Balaram Das,
Bhargava V. Desai,
Rahul Gupta,
Nikhil Sharma
|
| Petitioners |
Commissioner of Income Tax, Gujarat
|
| Respondents |
Saurashtra Cement Ltd.
|
| Citations |
2010 SLD 2739 = (2010) 325 ITR 422
|
| Other Citations |
CIT v. Saurashtra Cement & Chemical Industries Ltd. [2002] 121 Taxman 223 (Guj.) affirmed.,
CIT v. Elcon Engg. Co. Ltd. [1987] 167 ITR 639,
CIT v. Rai Bahadur Jairam Valji [1959] 35 ITR 148,
Kettlewell Bullen & Co. Ltd. v. CIT [1964] 53 ITR 261,
EID Parry Ltd. v. CIT [1998] 233 ITR 335 (Mad.)
|
| Laws Involved |
Income-tax Act, 1961
|
| Sections |
4
|