Gifted copyright is not taxable as a deemed receipt where no money is actually received.

Copyright gifted by an author was not treated as a taxable receipt merely because it had a market value. The Court applied the general income-tax principle that tax is charged on what is actually received, not on what might have been received, and held that the trader/stock-in-trade exception on an earnings basis did not apply to an author computing profits on a cash basis. The spread-over provision for lump sums received by authors supported the view that Parliament had not intended gifted copyright to be assessed by deemed market value. The market value of the gifted copyright was therefore not chargeable to income-tax.

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Issues: Whether the market value of copyright and associated rights in a novel, gifted by an author in the course of his profession, was taxable as a receipt for income-tax purposes notwithstanding that no money was actually received.

Analysis: The Court held that the general rule of income-tax law is that a taxpayer is taxed on what is received, not on what might have been received. The exception recognised in the authorities dealing with traders and stock-in-trade on an earnings basis did not extend to an author whose profits were computed on a cash basis and whose copyright was not stock-in-trade. The statutory spread-over provision for lump sums received by authors also indicated that Parliament had not treated gifted copyright as a taxable receipt. The disposal of the copyright by gift therefore did not produce a deemed receipt of its market value.

Conclusion: The market value of the gifted copyright was not chargeable as income-tax receipt. The appeal failed and the assessment was not sustained.

Ratio Decidendi: The market value of property created in the course of a profession cannot be brought into assessable income merely because it is gifted rather than sold, unless there is a statutory basis or a true stock-in-trade valuation case on an earnings basis.

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