Trading receipt timing: a later book transfer did not create taxable income where no fresh receipt arose in the relevant year.

An amount received from a buyer in connection with yarn pricing and a proposed additional excise burden was capable of being treated as a trading receipt when first received in March 1948, applying the statutory background of section 64A of the Sale of Goods Act, 1930. However, for income-tax purposes the character of the receipt was fixed on receipt, and no income arose in the previous year relevant to assessment year 1951-52 because no fresh receipt occurred in 1950. The later transfer of the balance to capital reserve did not create taxable income in that year, so the amount was not assessable as business income for assessment year 1951-52.

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Issues: (i) Whether the amount received from the buyer constituted a trading receipt of the assessee. (ii) Whether, assuming it was a trading receipt, any income arose in the previous year relevant to the assessment year 1951-52.

Issue (i): Whether the amount received from the buyer constituted a trading receipt of the assessee.

Analysis: The receipt was connected with the price of yarn and the proposed additional excise burden, and the statutory background under section 64A of the Sale of Goods Act, 1930 supported the view that the amount was in the nature of a trading receipt when received in March 1948.

Conclusion: The amount was capable of being treated as a trading receipt.

Issue (ii): Whether, assuming it was a trading receipt, any income arose in the previous year relevant to the assessment year 1951-52.

Analysis: The character of the receipt for income-tax purposes was fixed when it was received. Since the amount had been received in March 1948 and no further receipt arose in the calendar year 1950, the mere transfer of the balance to the capital reserve account in 1950 did not create income in that previous year.

Conclusion: No income arose in the previous year relevant to the assessment year 1951-52, and the amount was not assessable in that year.

Final Conclusion: The reference was answered in favour of the assessee because the amount was not taxable as business income for the assessment year 1951-52.

Ratio Decidendi: For income-tax purposes, the timing of a receipt is determined when it is first received; a later book entry or internal appropriation does not create income in a subsequent year if no fresh receipt arises in that year.

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