Consent decree label does not control tax character of occupancy payments; lawful use compensation is taxable as revenue income.

A receipt described in a consent decree as mesne profits is not ative for tax purposes; its character depends on the real legal effect of the decree and the nature of the occupation. Mesne profits arise only from wrongful possession, whereas occupation governed by mutually settled consent terms is not wrongful possession. On the facts discussed, the monthly sums were compensation for lawful use and enjoyment of the premises, and therefore represented revenue income rather than compensation for wrongful occupation or a capital accretion. The Revenue was entitled to look beyond the label used in the decree and assess the receipt according to its true legal nature.

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Issues: Whether the amount received by the assessee under the consent decree for continued occupation of the premises constituted mesne profits and, if not, whether it was taxable as a revenue receipt.

Analysis: Mesne profits are payable only for wrongful possession and are understood in the sense of profits actually received or which might with ordinary diligence have been received by a person in wrongful possession. The consent terms and decree showed that, from the date of the decree, the occupation was governed by mutually settled terms and not by wrongful possession. The use of the expression "mesne profits" in the consent decree did not bind the Revenue, which was entitled to examine the real nature of the receipt. On the facts, the monthly amounts were compensation for lawful use and enjoyment of the premises, not compensation for wrongful possession. Even otherwise, the receipt represented a return for user of the property and not a capital accretion.

Conclusion: The amount did not fall within the ambit of mesne profits and was rightly assessed as a revenue receipt. The issue was decided against the assessee and in favour of the Revenue.

Ratio Decidendi: A receipt described in a consent decree as mesne profits is not ative for tax purposes; its character must be determined from the real legal effect of the decree and the occupation, and compensation for lawful use of property is taxable as revenue income.

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