1985 (9) TMI 148 - AT - Income Tax

Summary

Issues: Taxability of amount received as a gift under a scheme

Analysis:
1. The appeal pertains to the assessment year 1980-81, where the assessee, a registered firm, received an amount of Rs. 50,000 as part of a Suiting Incentive Scheme by the principals, Bombay Dyeing & Manufacturing Ltd.

2. The assessee claimed the amount as exempt from taxation, arguing it was a capital receipt and akin to a gift, relying on judicial precedents like Rasi Exports (P.) Ltd. v. ITO, CIT v. Ramalakshmi Reddy, and CIT v. Groz-Beckert Saboo Ltd.

3. The Income Tax Officer (ITO) included the amount in the assessment, stating it was foreseen and anticipated, hence not casual or non-recurring as per section 10(3) of the Income-tax Act, 1961.

4. The Appellate Assistant Commissioner (AAC) upheld the inclusion of the amount, differentiating the case from Rasi Exports (P.) Ltd., where a similar receipt was held exempt due to lack of anticipation.

5. The Appellate Tribunal, considering the direct nexus between the receipt and the business, held that the amount was taxable under section 28 of the Act, as it was a reward for business activity and not a casual gift. The Tribunal distinguished the case from Rasi Exports (P.) Ltd. and Groz-Beckert Saboo Ltd., emphasizing the expectation of the gift due to business transactions.

6. The Tribunal concluded that the amount of Rs. 50,000 was rightly brought to tax, as the purchases made by the assessee were for the benefit of the business, and the gift was obtained as a result of exceeding specific purchase targets under the scheme.

7. Therefore, the appeal of the assessee was dismissed, affirming the taxability of the amount received under the Suiting Incentive Scheme as part of the business activity.