1991 (3) TMI 97 - HC - Income Tax

Receipt for Surrendering Godown Tenancy Not Capital Gain under Income-tax Act

The High Court determined that the receipt of Rs. 15,000 for surrendering a godown tenancy should be considered a casual and non-recurring receipt under ... Receipt Issues involved:The judgment deals with the issue of whether the receipt of Rs. 15,000 by the assessee for surrendering its tenancy of a godown should be treated as a capital gain or a casual receipt for tax computation under the Income-tax Act, 1961.Details of the Judgment:Issue 1: Nature of ReceiptThe assessee, an individual engaged in pawning and dealing in shares, received Rs. 15,000 for surrendering a godown tenancy during the assessment year 1976-77. Initially disclosed as a capital gain, the assessee later argued it was not taxable as a revenue receipt. The Income-tax Officer and the Appellate Assistant Commissioner considered it a casual receipt under section 10(3) of the Act.Issue 2: Tribunal's ViewOn appeal, the Tribunal determined the amount as a capital gain and directed the Income-tax Officer to compute tax accordingly under section 45. The Tribunal's decision was based on the interpretation of section 10(3) and the treatment of the receipt as a capital gain.Issue 3: Interpretation of Section 10Section 10 of the Income-tax Act deals with incomes not included in total income. The clause (3) of section 10 exempts receipts of a casual and non-recurring nature, subject to certain conditions. The Tribunal's decision was challenged on the grounds that the receipt was a capital gain not chargeable under section 45.ConclusionThe High Court held that the receipt in question, being a capital gain without a cost of acquisition for the tenancy right, should be considered a casual and non-recurring receipt under section 10(3) of the Act. Therefore, the Tribunal's decision to treat it as a capital gain for tax computation was deemed erroneous. The judgment favored the Revenue and ruled against the assessee, with no order as to costs.