1934 (11) TMI 15

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....is arose before the assessing authorities was whether this sum of Rs. 15,000 can be considered to be income, profit, or gain or business within the meaning of the Income Tax Act. The Income Tax Commissioner held that it was income accruing from business and, therefore, taxable. He, however, made a reference under Section 66 (2) on the application of the assessee, and the questions which we are called upon to answer are as follows :- (1) Did the sum of Rs. 14,560 assessed by the Income Tax Officer represent income, profits or gains ? (2) If so, did that sum represent a receipt arising from business within the meaning of Clause (vii) of sub-Section (3) of Section 4 of the Indian Income Tax Act, 1922, and consequently exclude....

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....nd also to the sum of Rs. 21,000 referred to above. The assessee financed the litigation, and Kanhaiyalal won his appeal. Apparently Kanhaiyalal was not willing to pay the sum of Rs. 21,000 in addition to the sums actually advanced. Eventually a compromise was arrived at between the assessee and Kanhaiyalal, under which the latter paid Rs. 15,000 in full satisfaction of the assessees claim under the agreement referred to above. The Income Tax Department deducted a sum of Rs. 440 on account of interest paid by the assessee, and assessed Rs. 14,560 to income tax. This is the sum which is referred to in question No. 1. The learned advocate for the assessee has argued that the receipt of Rs. 15,000 by Kanhaiyalal in the circumstances alre....

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....xcluding anything in the nature of a mere windfall. Thus income has been linked pictorially to the fruit of a tree, or the crop of a field. It is essentially the produce of somethings, which is often loosely spoken of as capital. But capital, though possibly the source in the case of income from securities, is in most cases hardly more than a element to the process of production. Their Lordships also referred to the phrase "business carried on by him" in Section 10. In the end they held the payment to Messrs. Shaw Wallace and Company as no more than a solatium. We are clearly of opinion that the observations of their Lordships of the Privy Council quoted above which are strongly relied on by the assessee, should be taken in conjunction w....