Lump sum in substitution for future trading profits is revenue receipt and taxable, not capital, when no underlying right passes.

A lump sum received under an amended partnership arrangement was treated as revenue because it represented the capitalised value of future trading profits from steel supplies, not consideration for transfer of a capital asset or underlying quota right. The payment was made in substitution for recurring profits that would otherwise have arisen from future supplies, and describing it as goodwill did not change its true character. The income-tax assessment on the amount was therefore upheld as chargeable to tax.

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Issues: Whether the lump sum of Rs. 60,000 received by the assessee under the amended partnership arrangement was a capital receipt or a revenue receipt liable to income-tax.

Analysis: The amount was held to be the capitalised value of the profits the assessee would otherwise have earned from supplying steel under the quota arrangement. The agreement did not transfer any right in the quota itself to the other party. The lump sum was paid in substitution for the recurring profit that would have arisen from future supplies, and the description of the amount as goodwill did not alter its true character.

Conclusion: The receipt was a revenue receipt chargeable to tax.

Final Conclusion: The assessee's challenge failed, and the income-tax assessment on the lump sum was upheld.

Ratio Decidendi: A lump sum received in substitution for future trading profits, without transfer of the underlying capital asset or right, is a revenue receipt liable to tax.

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