Leasehold acquisition compensation treated as capital receipt, not revenue income, because it arose from the asset and lease arrangement.

Compensation received for acquisition of part of a leasehold land was held to be a capital receipt because it arose from the character of the asset and the lease arrangement, not from any trade or commercial adventure. The receipt was linked to the lessee's continuing liability to pay full rent despite loss of part of the land, and the record did not show it as business profit or as revenue derived from trading in compensation. It was therefore not taxable as revenue income.

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Issues: Whether the amount received as compensation on acquisition of a portion of leasehold land was a capital receipt.

Analysis: The compensation arose from an acquisition contemplated by the lease arrangement and was tied to the lessee's continuing liability to pay full rent notwithstanding loss of part of the land. The receipt was not generated by any trade or business activity of acquiring land or trading in compensation, and the record did not show that it represented profit after deduction of expenditure incurred to earn it. On the facts, the receipt was referable to the character of the asset and the leasehold arrangement, not to a commercial adventure.

Conclusion: The amount was a capital receipt and was not taxable as revenue income.

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