LexHOSHIARPUR ELECTRIC SUPPLY CO. versus COMMISSIONER OF INCOME TAX, SIMLA
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
956
SUPREME COURT H,EPORTS
[1961]
•y6o
if they are due from customers for goods supplied or
C
. .
/ loans to constituents or transactions of a similar kind.
ommsssiofier o I
h
.
b
Income-ta•
n every case t e test is, was the de t due as an
Bombay '
incident to the business; if it is not of that character
v.
it will be a capita.I loss. Thus a loan advanced by a
M /s. Abd«llabhai firm of Solicitors to a company in the formation of
Abdulkad••
which it acted as legal adviser is not deductible on its
Kapu• J.
becoming irrecoverable because that is not a part of
the profession of a Solicitor: C. I. R. v. Hagart &:
z960
Dece1nber 6.
Burn Murdoch (1).
In our opinion the High Court was in error in
answering the question in favour of the respondent.
We therefore allow this appeal, set aside the judgment
and order of the High Court and answer the question
against the respondent.
The appellant will have his
costs in this Court and in the High Court.
Appeal allowed.
HOSHIARPUR ELECTRIC SUPPLY CO.
v.
•
COMMISSIONER OF INCOME TAX, SIMLA
(J. L. KAPUR, M. HIDAYATULLAH and J.C. SHAH, JJ.)
Income Tax-Assessee's receipts for installing new electricity
installations-If "Profit" or capital-Indian Electricity Act, I9IO
(9 of I9IO), Schedule c. 6 (I)(b)-Intlian Income-tax Act, x9n
(II of x922), s. 66(r).
The assessee, an electricity supply undertaking, received
certain sum of money for new service connections granted to its
customers. Part of this amount was spent for laying mains and
service lines. The Income-tax Officer treated the entire amount
as trading receipt. In appeal the Appellate Assistant Commis-
ner excluded the cost of laying service lines and the mains and
treated the balance as taxable income. The Appellate Tribunal
agreea with the Appellate Assistant Commissioner and held
that the service connection receipts were trading receipts and
the "profit element" therein was taxable income in the hands
(t) [1929] A.C. 386; (1929) 14 T.C. 43~·
•
....
2 S.C.R. SUPREME COURT REPORTS
957
of the assessee. In a reference under s. 66(1·) of the Income-tax
.r960
Act, the High Court substantially agreed with the view of the
. -
Tribunal. On appeal by the assessee,
H~shiarpur Elec-
H eld, that the High Court errea in holding that the excess Irie Supply Co.
of the receipts over the amount spent by the assessee for instal-
. v ..
lation of service lines was a trading receipt. The receipts Commisston•r. 01
though related to the business of the assessee as distributors of Income-tax, Simla
electricity were not incidental to nor in the course of the carry-
ing on of the assessee's business. They were receipts for bring-
ing into existence capital of lasting value. The total receipts
being capital receipts the balance remaining after a part thereof
was expended for laying service lines and mains, could not be
regarded as 'profit' in the nature of ~ trading receipt.
Commissioner of Income-tax v. Poona Elect~ic Supply Co. Ltd.,
(1946] 14 I.T.R. 622 and Monghyr Electric Supply Co. Ltd. v.
Commissioner of Income-tax, Bihar and Orissa, [1954] 26 I.T.R. 15,
discussed and applied.
·CIVIL
APPELL.A.TE JURISDICTION:
Civil Appeal
No. 328 of 1960.
Appeal from the order dated March 4, 1958, of the
Punjab High Court, Chandigarh, in Civil Reference
No. 29 of 1952.
A. V. Viswanatha Sastri, · R. Ganapathy Iyer and
G. Gopalakrishnan, for the appellant.
Hardyal Hardy and D. Gupta, for the respon{J.ent.
1960. December 6. The Judgment of the Court
was delivered by _
SHAH, J.-The Income Tax Appellate Tribunal,
Delhi Bench, stated under s. 66(1) of the Indian
Income Tax Act the following question for decision
of the High Court of Judicature at Chandigarh:
"Whether the assessee's receipts from consumers
for laying service lines, (that is, not. distributing
mains) were_ trading receipts and whether the profit
element therein, viz., service connection receipts minus
service connection cost was taxable income· in the
, assessee's hands?" .
·
The High Court answered the question as fol-
lows:
·
·. · .
.
" ...... the company's receipts from the consumers
for laying the service lines are trading receipts and
I 121
·
Shah J.
SUPREME COURT REPORTS
[1961]
'960
the profit element therein being the difference bet-
Hoshia•pur El"- ween the service connection receipts and the service
• tric supply co. connection costs is taxable income in the hands of the
v.
company. "
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