15 December 2008
ONE of the basic principles to decide the taxability of a receipt under the Income-tax Act, 1961 is to distinguish between capital and revenue receipts. The distinction between the two is vital because capital receipts are exempt from tax unless specifically taxable — capital gains, for instance.
Conversely, revenue receipts are taxable unless expressly exempt in accordance with the provisions of law. The Act does not define `capital receipt' and `revenue receipt', but then one has to depend on the natural meaning of the concepts and also draw support from various case laws on the subject.
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