Mesne profits treated as capital receipt; High Court declined to examine taxability and found no substantial question of law.

Mesne profits received from wrongful occupation were treated as capital in nature by the Tribunal, following the Special Bench view and the definition in Section 2(12) of the Code of Civil Procedure. The High Court noted that the Revenue had not effectively challenged that position and had taken no steps to restore its earlier appeal. Emphasising consistent application of tax law and the need for cogent justification before selectively contesting an accepted position, the Court declined to examine the taxability merits. The appeal was held not to raise any substantial question of law and was not entertained.

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Issues: Whether the appeal under Section 260A of the Income-tax Act, 1961 raised any substantial question of law in view of the settled position on the character of mesne profits and the Revenue's accepted stand in the earlier Tribunal decision.

Analysis: The dispute concerned the tax character of mesne profits received from wrongful occupation of premises. The Tribunal had followed the Special Bench view that mesne profits are capital in nature, relying on the definition in Section 2(12) of the Code of Civil Procedure, 1908. The Court noted that the Revenue had not effectively challenged that Special Bench decision and had taken no steps to restore its earlier appeal. In tax matters, the State is expected to apply the law uniformly and should not selectively contest a position already accepted in another case unless there is a cogent justification. On that footing, the Court declined to examine the merits of the taxability issue.

Conclusion: The appeal did not give rise to any substantial question of law and was not entertained.

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