Law:

Section:

Section 28(i) of the Income-tax Act, 1961 [Corresponding to section 10(1) of the Indian Income-tax Act, 1922] - Business income - Chargeable as - Assessment years 1944-45 to 1946-47 - During relevant assessment years, assessee, a scheduled bank, issued cash certificates of five years' currency at premium - Assessee's claim was that premium collected by it was a capital receipt and was not taxable - It was seen from records that premium so received was infact a receipt in advance from lender to be set off against interest, so as to reduce ultimate burden of interest while at same time ostensibly keeping and continuing high rate of interest under cash certificates - Whether, in aforesaid circumstances, premium received by assessee at time of issue of cash certificate was a revenue receipt and assessable to tax - Held, yes FACTS The assessee-scheduled bank, issued cash certificates from the year 1933. The certificates were of five years' currency and were originally issued at a lower price but from 1937 they were issued at the prices of Rs. 8, Rs. 80, Rs. 400 and Rs. 800 and were repayable on maturity at Rs. 10, Rs. 100, Rs. 500 and Rs. 1,000 respectively. They could be cashed at any time before maturity and the certificate contained a table showing the amounts repayable after different periods during the currency of a certificate of the price of Rs. 8. The said table proportionately held good for the certificates of other denominations. During the relevant assessment years, they were issued at a premium of eight annas for a certificate of Rs. 10, Rs. 5 for a certificate of Rs. 100, Rs. 25 for a certificate of Rs. 500 and Rs. 50 for a certificate of Rs. 1,000. This premium was not refundable. The certificates were not transferable and were repaid at the head office of the bank; but facility was provided to the constituents to send their deposits through any of the branches and arrangements were also made to cash them at the respective branches of the bank. The certificates were in other respects subject to the rules relating to depositors and deposits of the bank. During the assessment years in question, the assessee contended that the premium collected at the…

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