TaxTMI 
TaxTMI 
1992 (10) TMI 70
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....ises who had earlier agreed to provide the assessee with an alternative accommodation, in lieu of the premises under the occupation of the assessee ; since the purchaser could not find any alternative accommodation, the agreement provided for the said payment of Rs. 45 lakhs to the assessee. This amount was stated as "lump sum damages for loss which he suffered and/or incurred by the tenants on account of such shifting and incidental thereto and surrender their tenancy rights . . .". In pursuance of this agreement, the assessee received the sum of Rs. 45 lakhs and vacated the premises. The Revenue contended that this receipt was a capital gain and a revenue receipt, taxable during the assessment year in question. The Appellate Tribunal pointed out that there was no cost of acquisition involved in the hands of the assessee and, therefore, the question of capital gains accruing would not arise. The oft-posed question as to the nature of the receipt is thus before us. The finding of the Appellate Tribunal that the sum of Rs. 45 lakhs received by the assessee " was a recompense for relinquishing all the rights the assessee had in the tenanted property " cannot be assailed having rega....
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.... as " capital gain". In CIT v. B. C. Srinivasa Setty [1981] 128 ITR 294 (SC), the question was whether transfer of goodwill to a reconstituted firm resulted in capital gain chargeable to tax under the Act. The Supreme Court pointed out that the definition of "capital asset" is subject to the context, and, therefore, the court has to enquire "whether, contextually, section 45, in which the expression 'capital asset' is used, excludes goodwill". Having regard to the nature of the "goodwill", its accrual and development, it was held as incapable of being valued under section 48. No cost element, in the creation or accrual of goodwill can be identified or envisaged; therefore, "in such a case, when the asset is sold and the consideration is brought to tax, what is charged is the capital value of the asset and not any profit or gain". In other words, sale of an asset acquisition of which is incapable of being valued cost-wise does not produce any profit or gain but results in the fructification of only a capital value. Capital gain, therefore, has to be the difference between the cost of acquisition and the capital value received on transfer. To avoid such a result in all cases, and to....
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....rticular computation provision. But the question here is whether it is possible to apply the computation provision at all if a certain interpretation is pressed on the charging provision. That pertains to the fundamental integrality of the statutory scheme provided for each head". It was further held ( at page 300 ) : " What is contemplated is an asset in the acquisition of which it is possible to envisage a cost. " In CIT/CEPT v. Shamsher Printing Press [1960] 39 ITR 90 (SC), the assessee had to shift its business to another place because the premises in which the press was used were requisitioned by the Government. The Government paid certain sums to the assessee "on account of the compulsory vacation of the premises, disturbance and loss of business". The assessee contended that this was a capital receipt while the Revenue contended that the payment received by the assessee was a revenue receipt. The Supreme Court held that the payment was towards the loss of business because the business would be stopped or disturbed for some time by the compulsory vacation of the premises. Thus the amount received by the assessee was held to be a compensation towards the business loss. Cons....
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....yment or its measure that makes it fall within capital or revenue receipt. Therefore, the court is required to determine what was it that was paid for. Regarding the precedents on the question, the Supreme Court made the following observation which is quite apposite, at page 406 : "We have so far shown the true ratio of each case cited before us, and have tried to demonstrate that these cases do no more than stimulate the mind, but none can serve as a precedent, without advertence to its facts. The nature of the business, or the nature of the outlay or the nature of the receipt in each case was the decisive factor, or there was a combination of these factors. Each is thus an authority in the setting of its own facts." Thereafter, it was found that the requisition of the factories of, the assessee resulted in the stoppage of the business though the source of the raw material was intact. The assessee was not compensated for loss or destruction of or injury to a capital asset ; the entire structure of the business was affected and no business was left or was done in two years. This was due to compulsory requisition. Since the assessee did not carry on business at all, section 10 of ....