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Issues: Whether the sum of Rs. 50,000 received under the consent decree was a capital receipt or a trading receipt, and whether it was assessable as business profits under section 10 or section 10(5A)(d) of the Indian Income-tax Act, 1922.
Analysis: The receipt arose out of a suit for damages against a former employee and another company, where the claim included loss of service, expenses, general damages for loss of business, and special damages for transfer of business. The amount paid under the consent decree satisfied the claim and costs, and the surrounding facts did not establish a holding of agency in the statutory sense or that the payment was made at or in connection with termination of an agency. Even assuming the payment compensated loss of custom from one foreign constituent, the loss did not affect the assessee's capital structure or any capital asset. The receipt represented compensation for loss of income or profit in the ordinary course of business.
Conclusion: The amount of Rs. 50,000 was a trading receipt and was assessable as business income; section 10(5A)(d) did not apply, and the assessee's contention failed.
Ratio Decidendi: Compensation received for loss of business income or custom, where no capital asset or trading structure is impaired and no statutory agency termination is established, is a revenue receipt taxable as business profit.
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