"Contingent deposits" received from customers is "income"

It is now well settled that in determining whether a receipt is liable to be taxed, the taxing authorities cannot ignore the legal character of the transaction which is the source of the receipt. The taxing authorities are bound to determine the true legal character of the transaction. "Contingent deposits" received from leasing/hire purchase customers with a view to protect from potential sales tax liability, which is credited to turnover, is assessable to income-tax (Bazpur Co-operative Sugar Factory (1988) 3 SCC 533 distinguished).

 Sundaram Finance Ltd vs. ACIT (Supreme Court)