ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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TAXATION-Goodwill s Goodwill

Goodwill's Goodwill (By a Special Correspondent) ONE of the perennial problems in income taxation is how to draw the line between a 'special receipt' and 'income'. The problem has been particularly acute in countries like India where, following the British tradition, income is viewed as a regular return from definite sources, and any receipt falling outside this category is presumed to be 'capital'. In scrupulous deference to the celebrated dictum of Lord McNaghten that income tax is a tax on income, courts in India as in Britain have endeavoured to keep anything remotely resembling 'capital' strictly out of the net of the income tax, little realising that a capital receipt can also contain an element of gain and, from the angle of ability to pay, all accretions to capital ought to be reckoned as income. The attempt to keep all capital receipts entirely out of taxation however ill served equity, as a distinction not derived from a clear conceptual framework tends unavoidably to operate on the 'spin of a coin', as another British judge put it. What is worse, where the tax system permits any gain to escape taxation if it can be given the garb of a 'capital' receipt, irrespective of its incremental element, it becomes the gambit of resourceful taxpayers to receive as much of their ordinary income as 'capital' as they can and thereby avoid the mischief of the income tax.

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