INCOME TAX ACT, 1961
--Income--Accrual Security deposit--Assessee sold ice-cream through vendors. As per agreement entered into between assessee and vendors, assessee supplied freezers to vendors after taking from them full cost of the equipment as security deposit. On termination of the agreement, assessee should deduct certain percentage of cost of the freezer from the deposit. AO treated security deposit as income accrued in this year. Assessee argued that the right to accrue arises only on termination of agreement and not as long as the agreement with the vendor is continued. Held: Assessee could not treat these two amounts as receipts in the nature of income unless the so-called agreement terminated. In other words it was not a debt owned by assessee, therefore, security deposit could not be said as income accrued in the year of deposit.
Income Tax Act, 1961 Section 5
INCOME TAX ACT, 1961
--Head of income--Business income or capital gainsSale proceeds of land--Assessee, whose prime business was manufacturing and selling of ice-creams. The Memorandum of Association includes an enabling clause for assessee to carry on the business of Agency for real estate among others. Assessee had made investment in land and this was shown as fixed assets in the balance-sheet for all these years. Assessee sold the land when they got good price. Income from same was shown as capital gain but AO assessed the same as business income on the ground that it was an adventure in the nature of trade. Assessee contended that it never ventured into any trade. Held: AO failed to prove that such transaction was adventure in the nature of trade, therefore, sale of the capital asset would attract only capital gains.
Income Tax Act, 1961 Section 28(i)
Income Tax Act, 1961 Section 45
INCOME TAX ACT, 1961
--Income--Accrual Security deposit--Assessee sold ice-cream through vendors. As per agreement entered into between assessee and vendors, assessee supplied freezers to vendors after taking from them full cost of the equipment as security deposit. On termination of the agreement, assessee should deduct certain percentage of cost of the freezer from the deposit. AO treated security deposit as income accrued in this year. Assessee argued that the right to accrue arises only on termination of agreement and not as long as the agreement with the vendor is continued. Held: Assessee could not treat these two amounts as receipts in the nature of income unless the so-called agreement terminated. In other words it was not a debt owned by assessee, therefore, security deposit could not be said as income accrued in the year of deposit.
Income Tax Act, 1961 Section 5
INCOME TAX ACT, 1961
--Head of income--Business income or capital gainsSale proceeds of land--Assessee, whose prime business was manufacturing and selling of ice-creams. The Memorandum of Association includes an enabling clause for assessee to carry on the business of Agency for real estate among others. Assessee had made investment in land and this was shown as fixed assets in the balance-sheet for all these years. Assessee sold the land when they got good price. Income from same was shown as capital gain but AO assessed the same as business income on the ground that it was an adventure in the nature of trade. Assessee contended that it never ventured into any trade. Held: AO failed to prove that such transaction was adventure in the nature of trade, therefore, sale of the capital asset would attract only capital gains.