Mesne profits for wrongful occupation treated as capital receipt, not taxable as rent after tenancy ends.

Mesne profits received for wrongful occupation after termination of tenancy were treated as compensation for deprivation of use, not as arrears of rent. The Tribunal followed earlier authority that such receipts arise from unlawful possession and are capital in nature rather than revenue income. On identical facts, and for consistency with coordinate bench and jurisdictional High Court support, the contrary treatment adopted by the Revenue was not accepted. The receipt for the disputed unit was therefore regarded as not chargeable to tax.

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Issues: Whether mesne profits or compensation received for wrongful occupation of property after termination of tenancy was taxable as revenue receipt or was capital in nature.

Analysis: The Tribunal noted that the assessee had not pressed the preliminary grounds, and the surviving dispute related only to the character of the amount received for Unit L/40. It followed the line of authority that mesne profits represent compensation for deprivation of use and occupation of property after unlawful possession, and not arrears of rent arising from an existing tenancy. The Tribunal also relied on earlier coordinate bench and jurisdictional High Court approval of the view that such receipts are capital in nature and not chargeable to tax. On identical facts and to maintain consistency, the contrary treatment by the Revenue was not accepted.

Conclusion: The receipt was held to be a capital receipt not chargeable to tax, and the assessee succeeded on the substantive issue.

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