TMI Blog1959 (8) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the assessment of Income-tax for the assessment year 1950-51, the accounting year being 1949-50. The assessee is a registered firm and a licensed excise vendor carrying on the business of purchasing country spirit from the Excise Department of the State Government in bulk and selling it to consumers in bottles, and for this it has to pay licence fee. During the accounting year ending 31st March, 1947 (assessment year 1947-48), the assessee paid several lacs of rupees as licence fee. During this period its liquor shops remained closed on account of the outbreak of communal riots. On its representation, the Government, on account of the stoppage of the; business dud to circumstance beyond its control, allowed concession and refunds ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. He observed as follows: Since those payments are considered in assessment for the year in which they were paid, the refund on account of such items will have to be treated as a constructive revenue receipt in the hands of the assessee during the year under consideration. The entire amount should have been shown as business income of the year. Assessee had not shown the same on the ground that these were capital receipts. I wonder how the assessee could treat these receipts as capital receipts. The entire amount has to be included in the income for assessment purposes. The assessee went in appeal before the Appellate Assistant Commissioner who, after considering the various additions made, fixed the cash credits at ₹ 2,66 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the profits. Similarly, when there was a recoupment of the whole or part of the licence fee paid by way of refund from the Government for any reason, the recoupment must be considered as a revenue gain. I do not think, it can on any account be regarded as a capital receipt. The assesses cannot blow both hot and cold in the same breath and contend that while the outgoing stands, the incoming is not to be brought in. This position appears to me to be quite manifest and is supported by authorities. I may refer in this connection to the; case of Union Bank of Bijapur and Sholapur Ltd., In re [1942] 10 I.T.R. 21. In this case the assessee, a bank, claimed in the assessment year 1935-36 a certain amount as loss by reason of embezzlement on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of it is a casual appreciation of capital, as he seeks to do. This case is on all fours with the present case, and when, as in that case, the amount received back out of the amount embezzled was considered as a revenue gain, there is no reason why the amount refunded by the Government out of the licence fee paid cannot be regarded as a revenue gain. A similar view was taken by the King's Bench division in Gray v. Lord Penrhy [1937] 21 Tax Cas. 252. What happened in that case was this: In 1934 it was discovered that officials employed at a slate quarry owned by the respondent (Lord Penrhyn) had misappropriated money from 1928 to 1934 by falsifying the wages accounts. The respondent's auditors admitted negligence on the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r because it is simpler, by the bringing in of the receipt when it comes in. Looked at from the point of view of the chartered accountant and Lords Penrhyn, it seems to me that as the sum is an outgoing of the chartered accountants, so, looking at it from the other side, it is a receipt on the part of Lord Penrhyn. It seems quite plain when the amount paid as licence fee was deductible from the profits, any refund out of that amount by the Government for whatsoever reason must be considered as a part of the revenue gain and not as a capital asset. The assessee cannot have both ways. He cannot claim the payment of the licence fee as an outgoing and regard the subsequent refund as a capital asset. In my opinion, the sum in question is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same in a subsequent year will have to the taken into consideration in the estimate of profit made by the assessee in respect of its business in the later assessment year. We see much force in that contention and following the decision of the Bombay High Court in the aforementioned case, which held that it was a revenue gain and was assessable to tax as part of the total income of the assessee in the said case, we hold that the receipt in question is only of a revenue nature. We, therefore, hold against the assessee on this point. The Income-tax authorities had sufficient material before them on which they could reach their findings, and further it appears that they had made no error in law. This is purely a question of fact. When ..... X X X X Extracts X X X X X X X X Extracts X X X X
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