K. M. S. LAKSHMANIER AND SONS vs COMMISSIONER OF INCOME TAX AND EXCESS PROFITS TAX, MADRAS.

The Supreme Court held that under Rule 2-A of the Excess Profits Tax Act, 1940, advance amounts received by assessees as deposits were not 'borrowed money' prior to May 5, 1944, as they were merely advance payments for goods. However, amounts received after this date until February 14, 1945, were deemed trading receipts rather than security deposits. Post-February 14, 1945, the deposits constituted 'borrowed money' as they were used by the assessees for their business and were returnable only at the end of the business connection, thus impacting the computation of average capital for tax purposes.