THE COMMISSIONER OF INCOME TAX AND EXCESS PROFITS TAX, MADRAS versus THE SOUTH INDIA PICTURES LTD., KARAIKUDI.

Citation: [1956] 1 S.C.R. 223 · Decided: 14-03-1956 · Supreme Court of India · Bench: SUDHI RANJAN DAS · Disposal: Appeal(s) allowed

Judgment (excerpt)

\ 
S.C.R. 
SUPREME COURT REPORTS 
223 
THE COMMISSIONER OF INCOME TAX AND 
EXCESS PROFITS TAX, MADRAS 
v. 
THE SOUTH INDIA PICTURES LTD., 
KARAIKUDI. 
[S. R. DAS, c. J., BHAGWATI and 
VENKATARAMA AYYAR, JJ.] 
Indian Income Tax Act, 1922 .(XI of 1922), s. 10-Whethsr 
money received by the Assessee in the accounting period-As a revenue 
receipt or capital receipt-On the facts and in the circumstances of 
the instant case. 
The assessee-a. private limited company-carried on the busi· 
ness of distribution of films. In some instances the assessee used to 
produce or purchase films and then distribute the same for exhibi· 
tion in different cinema halls and in other cases the assessee used to 
advance monies to producers of films and secure the right of distri· 
bution of the films produced with the help of the monies so advanced 
by the assessee. 
In the course of such business it advanced monies 
to Jupiter Pictures for the production of three films and acquired the 
right of distribution of these three films under three agreements in 
writing dated the September 1941, July 1942 and May 1945. 
The 
said agreements expressed in similar language contained similar pro· 
visions. 
In the accounting year ending 31st March 1946 and in the pre· 
vious years the assessee had exploited its rights of distribution of 
the three pictures. 
On 31st October 1945 the assessee and Jupiter 
Pictures entered into an agreement cancelling the three agreements 
relating to the distribution rights in respect of the three films and in 
consideration of such cancellation the assessee was paid Rs. 26,000, 
in all by the Jupiter Pictures during the accounting period as com-
pensation. The question for determination was whether on the facts 
and in the circumstances of the case the sum of Rs. 26,000, received 
by the assessee from the Jupiter Pictures was a revenue receipt 
assessable under the Indian Income Tax Act. 
Held, per S. R. DAS C. J. and VENKATARAMA AYYAR J., 
(BHAGWATI J. dissenting) that the sum received by the assessee was 
a revenue receipt (and not a capital receipt) assessable under the 
Indian Income Tax Act inasmuch as:-
(i) the sum paid to the assessee was not truly compensation for 
not carrying on its business but was a sum paid in ordinary course 
of business to adjust the relation between the assessee and the pro· 
ducers of the films; 
so 
1956 
March 14 
224 
SUPREME COURT REPORTS 
[1956] 
1956 
(ii) the agreements which were cancelled were by no means 
agreements on which the whole trade of the assessee bad for all 
The Commissioner practical purposes been built and the payment received by the a.sess-
oj Income Tax and see was not for the loss of such a fundamental asset a.s was the ship 
Excess Profits Tax, managership of the aesessee in Barr Crombie cf Oo. Ltd. v. Oommis-
Madras 
sioners of Inland Revenue ([1945] 26 T.O. 406); and 
v. 
The South India 
Pictures Ud., 
Karaikudi 
(iii) one cannot say that the cancelled agreements constituted 
the framework or whole structure of the assessee's profit making 
apparatus in the sense the agreement between the two mar13arine 
dealers concerned in Van Den Berghs Ltd. v. Clark (L.R. [1935] A.O. 
431) was. 
It is not ~!ways easy to aecide whether a particular payment 
received by a person is his income or whether it is to be regarded as 
his capital receipt. 
Income is a Word of the broadest connotation 
and difficult and perhaps impossible to define in any precise general 
formula. 
Though in general the distinction between an income and 
.a capital receipt was well recognised and easily applied, cases did 
arise where the item lay on the border line and the problem bad to 
be solved on the particular facts of each case. No infallible criterion 
or test can be or has been laid down and the decided cases are only 
helpful in that they indicate the kind of consideration which may 
relevantly be borne in mind in approaching the problem. 
The 
character of the payment received· may vary according to the cir· 
cumstances. 
BHAGWATI J. (dissenting): that in the instant case, the pictures, 
if produced by the assessee itself would have been capital assets of 
the assessee. What the assessee did was that instead of producing 
the pictures itself it advanced monies to the producers for the pur-
pose of producing the pictures which it acquired for the purpose of 
distribution and exploitation. Nonetheless, the pictures thus acquired 
were capital assets of the assessee which it worked up

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