Allow Cookies!
By using our website, you agree to the use of cookies
The Supreme Court has held that even if a pronouncement cannot be strictly called the ratio decendi of a judgment, it would certainly be binding on the High Court. The bench rising of Justice Rohinton Fali Nariman and Justice Sanjiv Khanna observed that when the character of transaction is a capital receipt in the hands of the assessee it cannot be possible it acts as income in the accessee’s hand.
The issue that was brought before the High Court was whether receipt of subscription is in the hands of the assessee-company should be treated as income and not as capital receipt as the assessee has it, in its books of accounts, shown this as sum as income. The High Court held that a decision of Apex Code in Peerless General Finance and Investment Company versus RBI did not lay down any absolute proposition of law that all receipt of subscription at the hands of the assessee for the previous year relevant must be necessary treated as capital receipts. The Apex Court referring to the same case held that the direct focus of the judgment was not whether subscriptions so received, are capital or revenue in nature but on general principles.It has been held that such subscriptions would be capital receipts and if they were treated as income, this would violate the Companies Act.
Setting aside the judgment of the High Court, the Supreme Court observed that:
“The theoretical aspects of the present transaction is the fact that the assessee treated subscription received as income. The reality of the situation, however, is that the business aspect of the matter when viewed as a whole leads inevitable to the conclusion that the receipts in question were capital receipts and not income.”
86540
103860
630
114
59824