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2019 (7) TMI 880 - SC - Income TaxCharacterization of income - subscriptions were received in the years in question from the public at large under a collective investment scheme - receipts of subscriptions in the hands of the assessee -NBFC Company to be treated as income OR capital receipts - assessee has in its books of accounts shown this sum as income - impact of forfeiture clauses of subscription - HELD THAT:- It is true that there was no direct focus of the Court on whether subscriptions so received are capital or revenue in nature, we may still advert to the fact that this Court has also, on general principles, held that such subscriptions would be capital receipts, and if they were treated to be income, this would violate the Companies Act. It is, therefore, incorrect to state, as has been stated by the High Court, that the decision in Peerless General Finance and Investment Co. Limited [1992 (1) TMI 337 - SUPREME COURT] must be read as not having laid down any absolute proposition of law that all receipts of subscription at the hands of the assessee for these years must be treated as capital receipts. We reiterate that though the Court’s focus was not directly on this, yet, a pronouncement by this Court, even if it cannot be strictly called the ratio decidendi of the judgment, would certainly be binding on the High Court. Even otherwise, as we have stated, it is clear that on general principles also such subscription cannot possibly be treated as income. Mr. Ganesh is right in stating that in cases of this nature it would not be possible to go only by the treatment of such subscriptions in the hands of accounts of the assessee itself. The “theoretical” aspect of the present transaction is the fact that the assessee treated subscription receipts as income. The reality of the situation, however, is that the business aspect of the matter, when viewed as a whole, leads inevitably to the conclusion that the receipts in question were capital receipts and not income. In the circumstances, we set aside the judgment of the High Court and restore that of the Income Tax Appellate Tribunal.
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