Law: Income Tax Act, 1922

Section: 3

Section 4 of the Income-tax Act, 1961 [Corresponding to section 3 of the Indian Income-tax Act, 1922] - Charge of tax - Capital or revenue receipt - Assessment year 1954-55 - Assessee was an excise contractor - He paid certain kists to Government and same was claimed as revenue expenditure in assessment years 1949-50 and 1950-51 - Owing to certain circumstances, assessee could not tap all trees allotted to him and on his representation, Government agreed to refund a portion of kist paid - Assessee credited refund amount in his accounts - Whether since kist paid to Government was claimed and allowed as business expenditure in earlier years, amount refunded by Government to assessee was, by its nature, a taxable sum - Held, yes FACTS The assessee was an excise contractor. He had liquor shops at certain cities. The kist due from him for earlier years was Rs. 10,75,629. Out of this amount, the assessee paid Rs. 9,81,308 and claimed deduction of the same as revenue expenditure in the assessment years 1949-50 and 1950-51. Because of the Razakar troubles and the police action in the then Hyderabad State at the material time, the assessee could not tap all the trees allotted to him. On representation by the assessee, the Government agreed to refund a portion of the kist paid refunded Rs. 3,19,541. Out of this amount, Rs. 1,00,689 was set off towards the amount due from the assessee. The balance of Rs. 2,18,852 was adjusted towards the kist due from the assessee for the months of June and July, 1953. The assessee credited this amount in his accounts which were maintained on cash credit basis. The Tribunal held that sum refunded to the assessee was revenue receipt liable to tax. On reference : HELD The sum paid as excise kist had been deducted as revenue expenditure in the relevant assessment years. Further, instant was not a case of remission but one of refund and the amount refunded was taken as a credit entry in the assessee's accounts maintained on cash-credit basis, for the assessment year 1954-55. Therefore, the sum of Rs. 1,87,630 refunded by the Government to the assessee by adjustment was, by its nature, a taxable sum under the Act. Note : The case was decided…

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