TaxTMI 
TaxTMI 
1971 (10) TMI 4
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.... is 1955-56, the accounting period for the same ended on Asad Sudi 1, S.Y. 2011. The assessee was instrumental in discovering the existence of kankar deposits in Jind State. He also brought about an agreement between one Shanti Prasad Jain and the erstwhile State of jind, now a part of Punjab State, for the acquisition of sole and exclusive monopoly rights of manufacturing cement in the said Jind State. That agreement was entered into on April 2, 1938. The same was to remain operative for a period of 25 years, which term was liable to be extended to 100 years at the option of the said Shanti Parsad Jain or his nominee. Shanti Prasad Jain transferred his rights under that agreement to a public limited company by name M/s. Dalmia Dadri Cement Ltd. on May 4,1938. The assessee was one of the promoters of the said company. For the services rendered by the assessee, the Dalmia Dadri Cement Co. by an agreement dated May 271, 1938, agreed to pay him a commission of I % on the yearly net profits earned by the company from the said cement factory. That agreement was to subsist so long as the original agreement dated April 2, 1938, subsisted. The agreement dated May 27, 1938, between th....
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....ement mentioned earlier were stray acts, possibly occasioned by fortuitous circumstances. Business, as understood in the income-tax law, connotes some real, substantial and systematic or organised course of activity or conduct with a set purpose--see the decision of this court in Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax. By this statement we do not mean to say that under no circumstance a single transaction can amount to a business transaction. But this is not one such. Herein, we are dealing with the stray activity of a non-business man. Hence it is difficulty to agree with the revenue in its contention that the agreement entered into by the assessee with the Dalmia Dadri Cement Co. should be considered as a business activity. In the determination of the question whether a particular receipt is capital or an income, it is not possible to, lay down any single test as infallible or any single criterion as decisive. The question must ultimately depend on the facts of the particular case, and the authorities bearing on the question are valuable only as indicating the matters that have to be taken into account in reaching a decision. That, however, is not....
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....evied against the assessee. The matter came up before Finlay J. His Lordship held against the Crown. According to him the sum received was not a revenue receipt. This decision was reversed by the Court of Appeal but was restored on a further appeal by the House of Lords. Finlay J., in the course of his judgment, formulated the questions to be considered by him in these terms : " I agree with Mr. Latter that there are three questions here. The first is : What was this payment for ? The second is : If a payment for future rights, is it assessable ? The third question is : Ought it to go into the year 1927 ?" The learned judge's answer to the first question was that it was a payment for future rights. He held that it was really a payment for cancelling such rights as subsisted in the assessee between 1928 and 1940. Having answered the first question in that manner the learned judge held on the second question that it was not assessable. In arriving at that conclusion he reasoned thus " Not without hesitation, I have come to the conclusion that it is not liable to assessment. I think that the agreement being an agreement whereby this company had a share in the profits of another ....
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....hts which the appellants enjoyed under the agreements and which for a price they surrendered, was a capital asset." It is now well-settled that a distinction has to be drawn between a payment made for past services or discharge of past liabilities and that made for compensation for termination of an income producing asset. The former does not lose its revenue nature but the latter being a payment for destruction of a capital asset, must be considered as capital receipt. The distinction between a capital receipt and a revenue receipt came up for consideration before this court in Senairam Doongarmal v. Commissioner of Income-tax . The assessee therein owned tea estates consisting of tea gardens, factories and other buildings, and carried on a business of growing and manufacturing tea. The factory and other buildings on the estate were requisitioned for defence purposes by the military authorities. The assessee continued to be in possession of the tea gardens and tended them to preserve the plants but the manufacture of tea was completely stopped. The assessee was paid compensation for the year 1944-45 under the Defence of India Rules calculated on the basis of the out-turn of te....