Voluntary payment after business source ceased is not taxable income when made as a personal gift without legal obligation.

Where a freight-brokerage source had ceased to exist, a voluntary payment from a shipping company was held not taxable as income in the assessee's hands. The Calcutta HC noted that the brokerage activity had stopped when the company ceased carrying freight from Burma ports, so there was no existing profit-earning source during the relevant period. The receipt was found to be a personal gift prompted by long association, not a payment under legal obligation and not compensation for loss of profits of a going business. On those facts, the sum did not fall within assessable revenue income under the relevant income-tax provision.

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Issues: Whether the sum of Rs. 5 lakhs received by the assessee from the shipping company was assessable as income in his hands.

Analysis: The freight-brokerage activity had ceased when the shipping company itself stopped carrying freight from Burma ports, so there was no existing source from which brokerage could be earned during the relevant period. The payment was found on the record to have been made not under any legal obligation and not as compensation for an existing profit-earning activity, but as a personal gift prompted by the long association between the parties. On those facts, the receipt could not be treated as compensation for loss of profits of a going business and did not fall within taxable income under the relevant income-tax provision.

Conclusion: The receipt of Rs. 5 lakhs was not assessable income in the assessee's hands and the answer to the reference was in favour of the assessee.

Ratio Decidendi: Where the source of income has ceased to exist and a payment is made voluntarily as a personal gift without legal liability, the amount is not assessable as revenue income merely because it is related to an alleged loss of business.

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