HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
K. M. S. Lakshmanier and Sons v Commissioner of Income-tax and Excess Profits Tax, Madras
Civil Appeal No. 71 of 1952
[1953] SCR 1057 ·
Excess Profits Tax Act, 1940, Schedule II rule 2-A
Sources & disclosures includedDownload original judgment / order
5-judge bench · Patanjali Sastri CJI (author) · B. K. Mukherjea J. · Chandrasekhara Aiyar J. · Vivian Bose J. · Ghulam Hasan J.
Assessment years: Chargeable period ending 12 April 1945
01 · Facts of the case
Yarn merchants received customer advances under successive contractual arrangements. Earlier sums related to particular forward contracts; from 14 February 1945 a continuing security deposit unrelated to individual prices bore interest and was repayable when dealings ended.
Source: Primary report: SCR 1059–1063
02 · Discussion by the Hon’ble Court
Which customer deposits were borrowed money included in average business capital under rule 2-A? The final arrangement had the essential debtor-creditor characteristics of a loan: use of the money, interest and repayment of an equivalent sum, subject to defaults. Calling it a security deposit did not prevent that conclusion. Earlier contract-linked advances remained trading receipts in substance, even where the accounting name changed or repayment followed full payment of price.
03 · Judicial decision
The lower order was set aside. The reference was answered affirmatively for 14 February–12 April 1945 and negatively for the remainder; no order as to costs.
Source: Primary report: SCR 1068
04 · Outcome / in whose favour
Mixed; partial assessee relief. The lower order was set aside. The reference was answered affirmatively for 14 February–12 April 1945 and negatively for the remainder; no order as to costs.
Source: Primary report: SCR 1068
05 · AKHB REVIEW POINT
Classify deposits by operative obligations and split periods when terms change. The judgment does not make all deposits borrowed capital or decide their treatment under current provisions.
Source: Primary report: SCR 1067–1068
Source & verification
Download original judgment / order · Open cited source rendition
All twelve pages / SCR 1057–1068, no neighbouring judgment.
Statutory scope
Historical statutory text and assessment period only. Present statutory equivalence and later judicial treatment are not cleared.
Later treatment
Source checked 2026-10-19. Subsequent treatment and current-law applicability have not been comprehensively checked.
Page references identify the supplied PDF; paragraph references identify the judgment unless stated otherwise.
AI disclosure & professional disclaimer
This AKHB research note was prepared with AI assistance from an identified primary report. Independent human review is not represented.
General legal and tax research only; not legal or tax advice. Verify the complete judgment, applicable statutory version and subsequent treatment before reliance. The AKHB REVIEW POINT is editorial analysis, not the Court’s holding. No current-law clearance is claimed.