Statutory repayment under a fiscal concession was held outside business income and excluded from business-specific relief.

A statutory repayment of excess profits tax under section 11(11) of the Indian Finance Act, 1946 was not treated as business income because the provision did not deem it to be part of trading receipts. The Bombay HC distinguished the express deeming language in the proviso to section 12 of the Excess Profits Tax Act and held that the repayment arose from a fiscal concession, not from business activity or a trading source. It was therefore taxable as statutory income under the residuary head, and relief under section 25(4) of the Income-tax Act, 1922 did not apply.

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Issues: Whether repayment of excess profits tax under section 11(11) of the Indian Finance Act, 1946, constituted business income so as to attract relief under section 25(4) of the Income-tax Act, 1922.

Analysis: The repayment under section 11(11) was not treated by the Court as a continuation of the assessee's business receipts. The provision used different language from the proviso to section 12 of the Excess Profits Tax Act, which expressly treated repayments as business profits, and the absence of such language in section 11(11) was significant. The repayment arose from a statutory concession linked to the deposit scheme under section 10 of the Indian Finance Act, 1942, and not from any business activity or trading source. The amount was therefore characterised as a statutory income, falling within the residuary head rather than business income.

Conclusion: The repayment was not business income and section 25(4) did not apply.

Final Conclusion: The question referred was answered against the assessee, and the repayment of excess profits tax was held taxable as statutory income in the hands of the recipient.

Ratio Decidendi: A statutory repayment received under a fiscal concession is not business income unless the governing provision expressly deems it to be so; in the absence of such deeming language, it is taxable as statutory income under the residuary head and does not attract business-specific relief.

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