COMMISSIONER OF INCOME TAX, PATIALA vs M/s. GROZ BACKERT SABOO LTD.

The Supreme Court upheld the High Court's decision that the value of goods received as a gift cannot be treated as a revenue receipt under the Income Tax Act, 1961. The Court clarified that the cost of raw materials and semi-finished needles received by the assessee from their West German collaborators should be considered at their market value at the time of receipt, not as nil. The Court emphasized that when capital assets are converted into stock-in-trade, the taxable profit must be calculated by deducting the market value at the date of conversion from the sale proceeds.