Gopal Saran Narain Singh v CIT

Facts

• The assessee received certain amounts which the CIT sought to tax as income
• The assessee contended the receipts were capital in nature and not taxable
• The fundamental question of what constitutes "income" under the Income Tax Act was raised

Issues

1. What is the distinction between income and capital for income tax purposes
2. Whether every receipt is income, or only those that have the character of recurring/periodic return

Held

• Income is the periodic return from one's labour, property, or capital
• Capital is the fund or source from which income flows
• Not every receipt is income; only that which represents a return or profit (the fruit), not the tree itself
• A receipt must be examined to determine whether it is capital or income by its nature

Ratio Decidendi

The concept of income presupposes a source (capital, labour, property) and a return flowing from that source. The return is taxable; the source is not (unless converted to capital gains by specific provision). If a receipt represents the source itself or a portion of the corpus, it is capital. If it represents the periodical product of the source, it is income.