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2008 (1) TMI 386 - HC - Income TaxCapital or Revenue Expenditure – Going Concern – Payment of guarantee commission can not disallowed – The assessee had acquired four divisions during the year as going concerns along with their assets and liabilities which included amounts payable to four investment companies in five annual equal instalments - The amount due to these investment companies, by mutual agreement, commuted at a discounting rate of 12 per cent. and the difference of Rs. 32,50,557 was credited to the capital reserve of the assessee-company – Assesse contended this amount was not of the character of income or deemed income and that it had nothing to do with the trading activities of the assessee, instead the amount represented capital receipt and was not liable to tax – AO rejected the submissions of the assessee and assessed the amount is taxable income – Held that the profits arising on reduction of liabilities was not trading profits liable to be taxed as business income – amount is not taxable as income.
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