Revenue receipt on contract cancellation treated as taxable income where payment replaced expected trading profits, not a capital asset.

A payment received on cancellation of a commercial contract was held to be revenue in nature because it represented the profits the assessee might have earned under the contract rather than the price of a capital asset. The contract was entered into in the ordinary course of business, the assessee remained free to continue its activity, and the exclusion of competition was treated as an ordinary incident of trading arrangements, not the creation of a capital structure or enduring asset. The receipt was therefore assessable as income and not as capital.

---

---

Issues: Whether the amount received on cancellation of a commercial contract was a revenue receipt taxable as income or a capital receipt.

Analysis: The payment represented the profits the assessee might have made under the contract and was not the price of a capital asset. The contract was entered into in the ordinary course of business, the assessee remained free to carry on the activity, and the exclusion of competition was treated as an ordinary incident of such trading arrangements rather than the creation of a capital structure or enduring asset.

Conclusion: The receipt was revenue in nature and assessable as income, not capital.

---