TMI Blog1962 (7) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... d and paid-up share capital as on December 31, 1956, are as follows: Authorised ₹ 2,00,000. Subscribed ₹ 2,00,000. Paid-up ₹ 2,00,000. In the year 1957, its share capital was raised from ₹ 2 lakhs to ₹ 3,98,000. On the new shares issued, it collected ₹ 10,000 as entrance fees by charging at the rate of annas eight for every share under the authority of article 17 which is as follows: No person shall be considered as a shareholder until he has paid the prescribed entrance fee and premiums, if any, fixed per share, and the whole of the share value or the amount of call made if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant and hence allowable. The Appellate Assistant Commissioner dealt with these contentions in the following words reproduced from his order: ...............it has to be stated at the outset that the appellant had itself treated the entrance fees collected on new shares as revenue receipts in its books and it was also declared in the return as part of its business income. The appellant is not a company which was newly formed in the year 1957. The entrance fee was collected on the new shares issued as a result of increasing the share capital. The sum of ₹ 10,000 realised as entrance fees can by no means represent a capital receipt. It is a receipt in the course of the appellant's business and was rightly subjected to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x assessments. The entries in the books of account are not the criterion for finding the nature of a receipt for purposes of assessments. The respondent too appealed against the allowance of ₹ 5,000 aforesaid. In the above cross-appeals, the Tribunal upheld the assessment of ₹ 10,000 as also the disallowance of ₹ 5,000 aforesaid in the following words: 2. ...It was argued that it was not a business income at all, liable to be brought to tax. It is certainly income in that, this sum of ₹ 10,000 came to the coffers of the assessee bank. All income is liable to be taxed under the Indian Income-tax Act unless otherwise exempt. The assessee's learned counsel was not able to point out any such exemption. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel for the revenue does not dispute the fact that the additional share capital raised is only an addition to the capital assets of the company. The entrance fee levied must also partake the same character. It is an additional price fixed for the share. At any rate, it has nothing to do with the banking activities of the assessee. This fee is said to have been levied for meeting the incidental expenses incurred in connection with the issue of fresh shares. It may be that after meeting the incidental expenses, a residue is left. That residue in the ordinary course should have been credited to the reserve fund of the company. It must go to augment the reserve. The word income is not defined in the Income-tax Act. As to the true me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh possibly the source in the case of income from securities, is in most cases hardly more than an element in the process of production. The definition given by Sir George Lowndes has provoked a great deal of controversy. We get a glimpse of that controversy from the decision of the Supreme Court in Commissioner of Income-tax v. Vazir Sultan and Sons [1959] 36 I.T.R. 175; [1959] Supp. 2 S.C.R. 375. It is not necessary for us to go into this controversy in the present case. Suffice it to say that the receipt with which we are dealing in this case is a capital receipt. Quite clearly it was not the result of any banking activity of the assessee. Floating shares was not a part of the banking activity of the assessee. Shares are floated wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h which the receipt was connected. The excess over the costs of installation was not a trading profit and was not taxable income in the hands of the assessee. The ratio of the above decision undoubtedly supports the contention of the assessee in this case. The learned counsel for the revenue invited our attention to the decision of the Supreme Court in Commissioner of Income-tax v. Calcutta Stock Exchange Association Ltd. [1959] 36 I.T.R. 222; [1959] Supp. 2 S.C.R. 459 in support of his contention that the receipt in question is a revenue receipt. There, in consideration of putting the names of certain companies on the quotation list, a sum of ₹ 16,000 was realised by the assessees. The contention of the assessee was that S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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