CAPITAL AND REVENUE: ILLUSTRATION 7

An organization sells a building which was being used for business purposes, the amount received will be a capital receipt. If stock-in-trade is sold, the amount received will be a revenue receipt.

2. AMOUNT RECEIVED ON ACCOUNT OF A RIGHT

If a person is owner of a right, eg copyright, patent, trademark, etc. and he is receiving certain amount on its account, the decisive question will be whether the right is being completely surrendered or it is being given for use for some period of time on hire. If the amount is received for the complete surrender of right, it will be a capital receipt. In case the right Dfa Ho is not surrendered by the owner and is given for use, for a specific period, the amount received will be a revenue receipt.