Section 28(ii) — the law in short
What the courts have decided on section 28(ii), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Gillanders Arbuthnot & Co Ltd v CIT
Supreme CourtHelps department
My principal cancelled one of my many agencies and paid me compensation worked out on the commission I would have earned. Is that a capital receipt?
No, on these facts. The Supreme Court held the compensation was income. The company held agencies in a great many lines - paints, petroleum, cement, timber, metals, tea, engineering goods and much else - so acquiring agencies was a normal incident of its business and losing one did not impair its trading structure or cost it an enduring asset. The agency was terminable at will, the company had two years' notice, and the compensation was computed as a proportion of the commission on sales in its former territory. It merely lost a trading avenue and was free to carry on the rest of its business.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.
