word “profits” - Definition / Legal Terminology - Income Tax

Meaning of word profits As per Black s Law Dictionary (Fifth Edition): Profit. Most commonly, the gross proceeds of a business transaction less the costs of the transaction, i.e. net proceeds. Excess of revenues over expenses for a transaction; sometimes used synonymously with net income for the period. Gain realized from business or investment over and above expenditures. (ULTIMATE FASHION MAKER LTD., vs ITO- 2012 (7) TMI 459 - ITAT, DELHI), In E.D. Sassoon Company Ltd. and Others v. CIT,- 1954 (5) TMI 2 - SUPREME COURT has quoted the following observations of Lord Justice Fletcher Moulton in The Spanish Prospecting Company Limited [(1911) I Ch. 92] on the meaning of the word profits : . Profits implies a comparison between the state of a business at two specific dates usually separated by an interval of a year. The fundamental meaning is the amount of gain made by the business during the year. This can only be ascertained by a comparison of the assets of the business at the two dates. Profits , therefore, imply a comparison of the value of an asset when theasset is acquired with the value of the asset when the asset is transferredand the difference between the two values is the amount of profit or gain made by a person. (ULTIMATE FASHION MAKER LTD., vs ITO 2012 (7) TMI 459 - ITAT, DELHI), As per Mr. Justice Mahajan as he then was in CIT, Bombay v. Ahmedbhai Umarbhai Co.- 1950 (5) TMI 1 - SUPREME COURT , Profits of a trade or business are what is gained by the business. The term implies a comparison between the state of business at two specific dates separated by an interval of an year and the fundamental meaning is the amount of gain made by the business during the year and can only be ascertained by a comparison of the assets of the business at the two dates, the increase shown at a later date compared to the earlier date represents the profits of the business.