In Brief
A non-banking finance company collected subscriptions from the public under collective investment schemes, which were ultimately repayable with interest. The tax authority sought to tax these as income because the company credited them to its profit and loss account. The Supreme Court held that such subscriptions are capital receipts, not income, regardless of accounting treatment. The character of a receipt is determined by its legal substance—money collected for return to subscribers—not by entries in books. The Court emphasised that treating such amounts as income would violate the Companies Act and that there is no estoppel against claiming capital receipt status where the law is settled.
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