Petitioner entered into a deed of sale purportedly on installment. He discounted the promissory note covering the future installments for purposes of taxation.
Whether or not the promissory note should be declared cash transaction for purposes of taxation.
YES. A negotiable instrument is deemed a substitute for money and for value. According to Sec. 25 of NIL: “value is any consideration sufficient to support a simple contract. An antecedent or pre-existing debt constitutes value; and is deemed such whether the instrument is payable on demand or at a future time”. Although the proceed of a discounted promissory note is not considered part of the initial payment, it is still taxable income for the year it was converted into cash.