Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2015 (1) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (1) TMI 199 - HC - Income TaxCompensation received form P&G for sterilization of the assets Revenue receipt or capital receipt - Termination of contract between assessee and P&G Held that:- The distinction between the capital receipt on the one hand, and the revenue receipt on the other hand, is not that easy to maintain - obviously because, the implication of the classification of the amounts received by the assessee into either of the categories would entail in serious consequences, acute attention is paid both by the assessee and the AO higher the amount and greater the compensation in Commissioner Of Income-Tax Versus Barium Chemicals Limited [1987 (2) TMI 18 - ANDHRA PRADESH High Court] it has been held that in order to decide whether or not a payment is a revenue receipt, its true nature and substance must be looked into assessee has been manufacturing the product as and when orders are placed in ordinary course of business - The one, as regards which the payment was made, is not as a contract or order of that nature - M/s. P&G wanted the appellant to produce a product as regards which it i.e., appellant does not have the arrangement or machinery - an equipment with altogether different specifications was to be acquired only, to meet the needs of M/s. P&G. Barring that, there was no other necessity for the appellant to install that machinery - Obviously for that reason, the agency agreed to provide funds for installation - the machinery was installed and hardly before the test run was completed, M/s. P&G resiled from the contract. The new machinery installed by the appellant was exclusively for the purpose of manufacturing a specialized product and the contract in that behalf was terminated even before the production has commenced - the amount received by the appellant from M/s. P&G being ₹ 87,33,056/- certainly deserves to be treated as capital receipt - the amount cannot be kept outside the purview of the taxation - The machinery installed for manufacturing the new product has already become part of assets - the written down value of the assets has been fixed - once the appellant has the advantage of receiving a sum towards installation of machinery alone, the same deserves to be deducted from the WDV, to the extent it has been added to the value of block assets - It would have its own impact upon the amount of depreciation to be allowed on the block assets Decided partly in favour of assessee.
|