Refund of licence fee after prior deduction treated as taxable revenue receipt, not capital in nature.

Refund of licence fee previously allowed as a business deduction was treated as a revenue receipt when received in a later year, because the original payment had already been deducted in computing business profits. The subsequent recoupment retained the character of a business-related gain and was therefore includible in taxable income in the year of receipt, rather than being treated as capital in nature. The issue was answered against the assessee and in favour of the Revenue.

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Issues: Whether the refund of licence fee received by the assessee in a later year, after the fee had been allowed as a business outgoing in the year of payment, was a capital receipt or a taxable revenue receipt.

Analysis: The refund was referable to licence fee originally treated as an outgoing in computing business profits. Once the payment had been allowed as a deduction in the assessment process, the subsequent recoupment could not be treated as capital in character. The receipt was therefore to be regarded as a revenue gain arising in the course of business and includible in taxable income in the year of receipt.

Conclusion: The receipt was a taxable revenue receipt and not a capital receipt, and the question was answered against the assessee and in favour of the Revenue.

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