Hoshiarpur Electric Supply Co v. Commissioner Of Income Tax, Simla

956 SUPREME COURT H,EPORTS [1961] •y6o if they are due from customers for goods supplied or C ommsssiofier . . o / [loans ]I [to ][constituents or transactions ]h . [of ][a similar kind. ]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 &: 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. z960 Dece1nber 6. 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~· 957 of the assessee. In a reference under s. 66(1·) of the Income-tax Act, the High Court substantially agreed with the view of the Tribunal. On appeal by the assessee, .r960 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. [0]1 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: No. 328 of 1960. Civil Appeal 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. 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: z960 957 .r960