Revenue receipt characterization: payment for transferring contract benefits treated as trading income rather than a capital receipt.

Clarifies that an amount received for transferring the benefits of a procurement contract - where the taxpayer secured finance and passed on execution to another party - constitutes a revenue receipt arising from trading activity rather than a capital receipt. The analysis treats the transaction as a commercial venture in the nature of trade, rejects the financing-letter as creating a proprietary capital interest, and attributes the received sum to anticipated trading profit, making it taxable as business income.

---

---

Issues: Whether the receipt of Rs. 1,87,000 by the assessee for transferring the benefits of a contract for purchase of parachutes is a revenue receipt liable to income-tax.

Analysis: The facts found by the Tribunal and accepted by the High Court establish that the assessee entered into a contract with Tata Aircraft Ltd. to purchase parachutes and, lacking funds, arranged finance and subsequently transferred the benefits of that contract for a consideration. The Tribunal treated the transaction as a venture in the nature of trade rather than a one-off capital disposition, noting the normal commercial practice of securing contracts and passing on execution for a fixed sum. The High Court agreed that the sum actually received represented the profit anticipated from that trading venture and that the financing-letter arrangement did not create a genuine partnership interest forming a capital right but was collateral to the trading transaction. These findings support treating the receipt as income arising from business operations rather than a capital receipt.

Conclusion: The receipt of Rs. 1,87,000 is a revenue receipt and is liable to income-tax; the High Court's affirmative answer to the referred question is upheld and the appeal is dismissed in favour of the revenue.

---