Periodic sale consideration for trade marks and business assets was revenue in nature, not a capital receipt.

Periodic payments under a transfer deed were treated as consideration for the sale of trade marks, goodwill, business interests, stock-in-trade and related rights, rather than as compensation for an independent restrictive covenant. The deed described the monthly payment as part of the sale consideration and placed the tax burden on the vendor, which supported revenue character. A clause allowing stoppage of payment on breach of covenants was only a term in terrorem and did not change the substance of the arrangement. On those facts, the recurring payment was an annuity-like revenue receipt and not a capital receipt.

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Issues: Whether the monthly payment of Rs. 1,500 received under the sale deed dated 12 March 1951 was a capital receipt or a revenue receipt in the hands of the assessee.

Analysis: The payment was held to be consideration for the transfer of the assessee's trade marks, goodwill, business interests, stock-in-trade, and associated rights. The deed expressly treated the monthly payment as part of the sale consideration and also placed the tax burden on the vendor, which negatived the contention that the payment was compensation for a restrictive covenant. The clause enabling stoppage of payment on breach of covenants was treated as a term in terrorem and did not alter the true character of the payment. On the facts, the arrangement was an annuity or recurring consideration for transfer of a capital asset, falling outside capital receipt treatment and answerable as income.

Conclusion: The monthly payment of Rs. 1,500 was a revenue receipt and not a capital receipt; the answer to the reference was against the assessee.

Ratio Decidendi: Where periodic payments under a transfer deed are in substance consideration for the sale of trade marks and allied business assets, and not compensation for an independent restrictive covenant, the receipts are revenue in character.

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