Law: Income Tax Act, 1922

Section: 4(1)(a)

Income tax Act (XI of 1922)---S.4(1)(a) Income from trading Donation Loss suffered by assessee made good by donation from foreign collaborators Such collaborators under no legal obligation to make good that loss Assessee showing such amount as miscellaneous income Department making assessment treating same as trading income Held, a voluntary payment made without consideration and under no legal obligation could not fall in category of income. Bombay City II , 1963 49 I T R 594 rel. JUDGMENT AJMAL MIAN, J. The present reference raises the following question of law: "Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the receipt of Rs.1,38,867 was not income in the hands of M/s. Smith Kline & French of Pakistan Ltd.' The brief facts leading to the filing of the above reference are that the respondent company was incorporated in December, 1949 in the name of "Pharma Company Limited' having paid up capital R's. one lac upto 30 11 1963 and its shares were wholly owned by M/s. Smith Kine USA Laboratories. It further seems that the name of the above company was changed into the name of M/s. Smith Kline & French of Pakistan Limited (i.e. the present name) and the capital was raised to Rs. 16 Lacs, the break of which was Rs. 11,75,000 provided by the foreign collaborator and Rs. 4,25,000 from the indigenous sources. It also seems that there was a sum of Rs.1,38,867 was shown as loss, upto 29 2 1964, which was made good by the foreign collaborator by donating the above sum, .which was shown in the account books as miscellaneous income after June,…

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