Compensation for compulsory acquisition of business premises is capital, not taxable revenue, when the business permanently ceases.

Compensation received on compulsory acquisition of business premises, where the assessee was permanently dispossessed and the business ceased, was held not to be a taxable revenue receipt. The court reasoned that a receipt linked to the cessation of business is not generated by carrying on that business during the relevant year and therefore does not take on the character of income liable to tax. The compensation was accordingly treated as capital in nature and not assessable as revenue receipt.

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Issues: Whether compensation received on acquisition of business premises, resulting in cessation of business, was taxable as a revenue receipt.

Analysis: The compensation was received because the assessee was permanently dispossessed of its business premises and the business ceased. A receipt connected with the cessation of a business is not the product of carrying on that business during the relevant previous year and therefore does not assume the character of a taxable revenue receipt.

Conclusion: The amount of compensation was not liable to tax as a revenue receipt and the question was answered in the affirmative against the Department.

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