In Brief
A finance company received subscription amounts from investors under collective investment schemes for the assessment years 1985–86 and 1986–87. Although the company recorded these subscriptions as income in its profit and loss account, the Supreme Court held they were capital receipts, not revenue. Since no subscriptions were actually forfeited during the relevant period and all amounts were to be repaid with interest at scheme end, they were capital in character. The Court ruled that accounting treatment does not determine the true legal character of a receipt—substance prevails over form. Crediting such amounts as income would also violate the Companies Act. The appeal was allowed and the Income Tax Appellate Tribunal's decision restored.
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