1991 (6) TMI 41 - HC - Income Tax

Court rules Rs. 3 lakh receipt taxable as revenue, not capital.

Commissioner Of Income-Tax Versus Mineral Mining Company Pvt. Limited

Commissioner Of Income-Tax Versus Mineral Mining Company Pvt. Limited - [1992] 194 ITR 258, 96 CTR 24 Issues Involved:1. Whether the sum of Rs. 3 lakhs received by the assessee from the Gujarat Mineral Development Corporation was a capital receipt or a revenue receipt liable to tax.2. Whether the sum of Rs. 3 lakhs, if not a capital receipt, was a casual receipt not liable to tax.Summary:Issue 1: Capital Receipt vs. Revenue ReceiptThe court analyzed whether the sum of Rs. 3 lakhs received by the assessee was a capital receipt or a revenue receipt. The assessee, a private limited company engaged in mining activities, had entered into an agreement with the Gujarat Mineral Development Corporation (the Corporation) to withdraw legal proceedings and vacate possession of Survey No. 30. The agreement was made in the ordinary course of business and was considered an adjustment of rights, forming part of the business activity of the assessee. The court noted that the assessee had not acquired any enduring capital asset nor was its trading structure impaired by the agreement. Consequently, the sum of Rs. 3 lakhs was deemed a revenue receipt and not a capital receipt.Issue 2: Casual ReceiptThe court examined whether the sum of Rs. 3 lakhs could be considered a casual receipt. It was found that the receipt originated from a business agreement and was not unexpected or fortuitous. The agreement was a result of negotiations and deliberations, and the receipt was directly linked to the assessee's business activities. Therefore, the court held that the receipt was not casual in nature and was liable to tax.Conclusion:The court answered both questions in the negative and in favor of the Revenue, concluding that the sum of Rs. 3 lakhs was a revenue receipt liable to tax and not a casual receipt exempt under section 10(3) of the Income-tax Act, 1961.