TaxTMI 
TaxTMI 
2010 (1) TMI 773
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....der these circumstances, we uphold the impugned order on this issue as the same is in conformity with the view taken by the Tribunal in assessee's own case in the immediately preceding year. This ground, therefore, fails. 3. The only grievance raised by the revenue in its appeal and the second issue raised in the assessee's appeal is against the computation of deduction under section 80HHC on cancellation of forward exchange contracts amounting to Rs. 2,85,898. Here also both the sides are in agreement that the facts and circumstances of these grounds are similar to those already decided by the Tribunal in the afore-noted order. The Tribunal in assess- ment year 1997-98 has held that the profit on cancellation of forward exchange contract is profit of business but not derived from .export activity as the amount was received from Banks in India and not in convertible foreign exchange contract as per clause (baa) of Explanation (1) to section 80HHC. The Tribunal while remitting the matter to the file of the Assessing Officer held that 90 per cent of the same was liable to be reduced from the profits of the business as per clause ( bad) of Explanation (1) to section 80HHC. In ....
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....uent to which the latter agreed to pay the assessee-company US$ 1,15,000 against the loss of reputation and goodwill in addition to US$ 40,000 against legal fees and other incidental expenses on the condition of the assessee-company withdrawing all the claims lodged against UBS. Mutual settlement was recorded and accepted vide letter dated 4-9-1997 by UBS to the assessee and the responsible officers of the assessee-company. Pursuant to that the assessee received US$ 1,15,000 equivalent to Indian Rs. 41.58 lakhs against loss of reputation and goodwill from UBS in addition to receipt of Rs. 14.46 lakhs towards legal expenses, etc. The said amount received towards legal and incidental expenses was accounted for as income. However, the compensation of Rs. 41.58 lakhs towards loss of reputation and goodwill was firstly included in the income and then deduction was claimed on the reasoning that the said compensation was capital receipt and did not bear the character of income. The Assessing Officer observed that the definition of 'income' under section 2(24) was inclusive. Even if there was no specific clause in such definition for including the amount of compensation within its scope, t....
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....heth Rajeev US$ 75,000 (ii) Mr. Amar Nath US$ 75,000 (iii) Mr. Pansara Nayan US$ 75,000 Grand Total US$ 3,80,000 7. From the extract of this mutual settlement it is palpable that the assessee received two types of compensations, viz., one against legal fees and incidental expenses which was promptly offered for taxation and second towards loss of reputation and goodwill. The dispute, in the instant ground, centers around the taxability or otherwise of compensation "against loss of reputation and goodwill". It is further noted that the three Executives of the assessee-company were also awarded compensation against loss of reputation and goodwill at US$ 75,000 each. On a specific query from the Bench, the learned A.R. stated that these three persons considered such compensation as capital receipts in their respective assessments, which stand has not been disturbed by the revenue. This contention was not controverted on behalf of the revenue. It, therefore, transpires that compensation received by the responsible officers of the company, under similar circumstances, has been accepted as capital receipt in their assessments, whereas the amount in question has been held to....
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....nd not exhaustively. According to this provision "'income' includes (z) profits and gains...". Thus, this definition includes various items as mentioned in clauses (i) to (xiv). If any other item of receipt is or contains the element of income in common parlance, that would still be included within the scope of the definition of 'income' under this provision notwithstanding the fact that there is no specific inclusion of such item in the definition. The word 'income' has to be understood in the generic sense. If a receipt bears the traits of income as per the plain and natural meaning, the same will still be included within the scope of section 2(24) even if there is no specific mention of such item in the definition clause. It is more aptly demonstrated from the scheme of the Act itself by which the receipt by way of rent from property, although not included under sub-section (24), is income as specifically included in Chapter IV-C of the Act. 11. In the case of G.R. Karthikeyan (supra), the assessee was having income from various sources including salary and business. He participated in the All India Highway Motor Rally and was awarded the first prize of Rs. 20,000 by the....
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....ncome and, hence, such an amount cannot be held to be liable to tax. 12. No strait-jacket set of principles have been enshrined in the Act for drawing a distinction between a capital and revenue receipt. One of the one well recognized criterion, in the absence of transfer of a capital asset, is to ascertain whether the receipt is on account of loss of income or source of income. It is trite law that any receipt in the nature of compensation, costs, damage, etc., by what ever name called, towards loss of income is a revenue receipt. However, any receipt to compensate for the loss of source of income is a capital receipt as has been held by the Hon'ble Supreme Court in Oberoi Hotel (P.) Ltd. v. C/r[1999] 236 ITR 903. In that case, the assessee-company was operating, managing and administering many hotels belonging to others for a fee at several places. The company agreed to operate the Hotel Oberoi Imperial for which it was to receive a certain fee. The agreement was to run for an initial period of ten years. The agreement also gave the assessee a right to exercise the option of purchasing the hotel in case its owners desired to transfer the same during the currency of the ag....
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....is to make good actual or prospective loss in a particular trading transaction or set of transactions, it is a revenue receipt liable to tax. However, any receipt towards loss of source of income is a capital receipt. Loss of source of income does not necessarily mean that it must absolutely extinguish. If the source of income has been severely beaten thereby causing serious damage to the income-earning apparatus itself, it will also be construed as the loss of source of income. Such indentation to the source can be caused in different ways. One of such ways may be maligning the name of the business, resulting in tarnishing the reputation and causing damage to the goodwill of business. So if goodwill of the business is damaged and later on some compensation is awarded in lieu of that, it will also fall in the same category of loss to the source of income and consequently such a receipt will also qualify to be characterized as a capital receipt. It is imperative that the receipt should be, in fact, towards loss of goodwill in general and no part of it should relate to make good the loss in a particular trading transaction or set of transactions. If such a receipt cannot be identifie....
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....e trees for which the assessee had earlier entered into agreement with three parties, who became defaulter, sold. When the matter finally came up before the Hon'ble Supreme Court, it was held that the amount received by way of advance consideration was a capital receipt and, hence, could not be treated as revenue receipt. Here again we find that the facts of this case fall in an altogether different compartment. Rather it supports the view point of the assessee inasmuch as it has been held in that case that the receipts by way of forfeiture amount received by the assessee in respect of the abortive sale transaction of old and unyielding rubber sheets constituted capital receipt. The last case taken note of by the authorities below is the judgment of the Hon'ble Supreme Court in the case of Emil Webber v. CIT[ 1993] 200 ITR 483. In that case, the tax paid by the Indian company was held to be taxable under the head "Income from other sources". Here again we are at loss to find any match between the facts of that case vis-a-vis those under consideration. 16. The main criteria to judge as to whether the compensation is capital or revenue is to ascertain the purpose for which su....