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Refund of mobile deposit - revenue or capital?

CA Shraddha (Mcom, CS Exe.) (Service) (224 Points)

05 December 2011

Hello All,

Whether refund of mobile deposit can be considered as revenue receipt? Any case law in this regard.......

Thakyou in anticipation.

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13 Replies

(Guest)

In my opinion, it is revenue.

Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 05 December 2011

It should be a capital receipt. It cant be considered as revenue, becasue the amount which you had paid to teh mobile co. you are getting back the same amount. Hence while paying the amount it should be shown under the head Loans & Deposits & while getting back the refund it will become nil, by crediting BS account.

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CA Shraddha (Mcom, CS Exe.) (Service) (224 Points)
Replied 05 December 2011

Yes I also believe that it should be capital receipt but what to do in following circumstances:

if not shown under the head loans & advances in books of the assessee and
mobile deposit has been made out of past withdrawal of the assesee

amit agarwal (dept head) (137 Points)
Replied 05 December 2011

hi shraddha

it cant be considered as revenue as the same is not allowed while deposit under it act

moreover irrespective of source and presentation of such deposit it should be considered as capital receipt unless and until earlier the same was allowed as expenditure under the act while making deposit

1 Like

Arka Bose (None) (313 Points)
Replied 06 December 2011

or that,we have to know whether the receipt of the money by the mobile company is treated as revenue income or not,and whether its allowed as expense in the year of payment.
Incase of telecom companies,it is not allowed as far as I know,asthey are treated as liability.
Also,apart from landlines phones,electricity providers gives interest on the security deposit,thus,the deposit itself is not an income of the business.
Also,I have many times adjusted the security deposit against the last bill outstanding when i wanted to disconnect my connection,that time,they should treat it as income,thus,receipt of security deposit is not taxable in the hands of company,and thus,it should not be allowable expense in my hands(suppose i ran a business and i opted for a connection).

And for mobile companies,there is a huge amount of deposit,which are shown in their balance sheet,as there are many customers,so it further makes sense as a capital receipt since they are repayable and is claim against the business.

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DIPESH (Audit Assistant) (33 Points)
Replied 06 December 2011

It is a capital receipt..

srinivass (CA Final) (2466 Points)
Replied 06 December 2011

The mobile deposit recieved ...the treatment for this is based on the treatment of mobile deposit at the time of payment.......................

CA Suraj Prasad Shaw (Chartered Accountant) (504 Points)
Replied 06 December 2011

In my opinion it is a Capital receipt......

Mohit Jangid (Article) (141 Points)
Replied 06 December 2011

its a capital receipt

sams siddiki (CA finalist) (30 Points)
Replied 06 December 2011

its simply a capital receipt. whatsoever a case may be.....i.e. wheather taken in balance sheet or not. Simply its not income from your business activity hence it is once in a while income so it must be capital in nature........

CA. Amit Prajapati (Chartered Accountant) (118 Points)
Replied 06 December 2011

If it pertains to Income Tax specifically, it should be classified in reference to section 41 of IT Act. Where it say: Where an allowance or deduction has been made in the assessment for any year in respect of expenditure incurred by the assessee - and subsequently assessee was able to recover the allowed allowance or deduction, it will be chargeable to income-tax as the income of that previous year, in respect of the allowance or deduction, whether it be in cash or any other manner.

So you have to identify whether in any earlier assessment year deposit was treated as expense and allowed as deduction, if so it will be treated as income in the year of receipt. If it was not charged as expense it will not be chargeable to income on subsequent refund. Please refer section 41 in detail.

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Rahul Gupta (Chartered Accountant) (644 Points)
Replied 07 December 2011

If shown as a Asset (Loans & Advances) than treated as Capital Receipt and dispose off the asset with relevant cash receipt otherwise treat it as Revenue Receipt