TaxTMI 
TaxTMI 
2013 (1) TMI 681
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....e amount of Rs.1,15,70,000/- received by the appellant from DTTI in terms of release agreement with DTTI is capital receipt or revenue receipt?" 2. The assessee is a firm of chartered accountants. From the year 1983, under an informal understanding it was getting referred work from M/s Gupta Chaudhary & Ghose, Chartered Accounts of Calcutta who were doing the work in Calcutta which was referred to them by Deliotte Haskins & Sells („DHS‟), a firm of chartered accounts based outside India. The understanding between the assessee-firm and the chartered accountants firm in Calcutta was limited to the work in Delhi and surrounding areas only. It may also be added that DHS was part of the chartered accountants firm by name "Deliotte....
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.... it would represent capital receipt. It was contended that the amount did not represent professional income. It is emphasised that for 13 years (1983-1996) the assessee-firm was carrying out the referred work which was quite lucrative and the arrangement with DHS through the Calcutta firm constituted the source and once that source got terminated, the compensation received can only be capital in nature. 5. We think that there is a good deal of force in the contention of the assessee. In Kettlewell Bullen & Co. Ltd. v. CIT: (1964) 53 ITR 261 the Supreme court drew a distinction between the compensation received for injury to trading operations arising from breach of contract or from the exercise of sovereign rights and compensation receiv....
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....as one in which the assessee parted with an asset of an enduring value. We are, therefore, unable to agree with the High Court that the amount received by the appellant was in the nature of a revenue receipt." 6. The ratio of the above judgment applies to the present case. The Tribunal seems to have been troubled by the fact that despite the termination arrangement with DHS the assessee did not cease to carry on the profession. This aspect of the matter has also been answered by the Supreme Court in the above judgment and it has been held that the fact that the assessee continued its business or its usual operations even after termination of the agencies was of no consequence. What appears to be the ratio of the judgment is that if the r....
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.... difficult to conceive of a professional firm of chartered accountants entering into such arrangements with international firms of chartered accountants, as the assessee in the present case had done, with the same frequency and regularity with which companies carrying on business take agencies, simultaneously running the risk of such agencies being terminated with the strong possibility of fresh agencies being taken. In a firm of chartered accountants there could be separate sources of professional income such as tax work, audit work, certification work, opinion work as also referred work. Under the arrangement with DHS there was a regular inflow of referred work from DHS through the Calcutta firm in respect of clients based in Delhi and ne....