Revenue character of pond-water receipts confirmed where recurring commercial use, not transfer of a capital asset, generated the income.

Receipts from allowing a factory to draw water from a pond in agricultural land were held to be revenue in nature because the arrangement was a continuing commercial agreement with recurring annual consideration, and no capital asset was transferred or sold. The pond remained with the assessee, so the payments arose from exploitation of the water resource rather than from capital disposition. The receipts were also not agricultural income merely because the pond was situated on agricultural land. They were therefore taxable as revenue income and not exempt agricultural income or capital receipts.

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Issues: Whether the receipts from permitting a factory to draw water from a pond situated in the assessee's agricultural land were capital receipts or taxable revenue income, and whether they could be treated as agricultural income.

Analysis: The arrangement was a continuing commercial agreement under which the assessee allowed the purchaser to draw water year after year for a fixed annual consideration. The pond remained with the assessee and no capital asset was transferred or sold. The receipt was not casual or isolated, but arose from a recurring exploitation of water available in the pond. On these facts, the nature of the receipt was revenue and not capital, and the proceeds could not be treated as agricultural income merely because the pond was located in agricultural land.

Conclusion: The receipts were taxable revenue income and not capital receipts or agricultural income.

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