TMI Blog1962 (11) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... company in Calcutta and it appears that rupees one lakh was paid on account of his house in Rangoon although he had claimed about ₹ 2? lakhs for the same. As long as the war continued, the business of carrying freight from Rangoon was entirely stopped. In 1945, the war came to an end and the assessee again pressed his claim. In fact, he had claimed a sum of rupees ten lakhs altogether, of which a part was for the Rangoon house and the remainder for loss of freight business in Burma. As a result of a remand by this court and the filing of a supplementary statement of case we are now in receipt of sufficient information and it appears that so far as the firm was concerned, it had no written contract of employment, but functioned as freight brokers for the steamer company for several decades and were paid approximately one per cent. brokerage on the freight booked by them. It is also on record that about rupees one lakh per year was the approximate sum that was earned by the firm. As I said, subsequent to the Japanese occupation of Burma, the business of the company of carrying freight from Rangoon had been completely closed and the assessee put in a claim of about rupees ten la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compensated for the same. In this view of the matter, it was held that no question arose about the company preventing the assessee from earning the freight brokerage during the four years between February, 1942, and June, 1946, and that the payment was motivated purely by feelings of generosity on the part of the steamer company, having regard to the fact that the assessee had been associated with the company for a number of decades prior to 1942. It was, therefore, in the nature of a personal gift and not taxable as income in his hands. As I said, the matter having been referred to court it came up before Chakravartti C.J. and was referred back for the determination of certain facts which have now been determined. The question that has been referred to us is as follows: Whether, on the facts and in the circumstances of this case, the receipt of ₹ 5 lakhs by the assessee from the British India Steam Navigation Co. Ltd. was assessable income in his hands? On behalf of the assessee it is argued that during the relevant years the business had entirely vanished and did not exist, since there could be no freight brokerage where the company itself had stopped plying its sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quite clear that one must read the statement of the steamer company in letter of the 17th March, 1952, in the background of all the facts. As I have stated above, it has now been distinctly found that the steamer company ceased to do any freight business from the 20th of February, 1942, from Burma ports. Therefore, there was no possibility of the assessee earning any freight brokerage. A distinction must be made between cases where income could have been earned by the assessee and cases where, in the facts and circumstances of the case, it could not be earned at all. In support of his argument, Mr. Pal has relied on Commissioner of Income- tax v. Shamsher Printing Press [1960] 39 I.T.R. 90 (S.C.). The facts there were as follows: The respondent firm had for the purposes of its business a printing press. The premises in which the press was housed was requisitioned by the Government and the respondent had to shift its business to another place where some time later they again continued the old business. The Government paid certain sums as compensation on account of the compulsory vacation of the premises, disturbance and loss of business. The question was whether this amount should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total of the income that has been lost... In that case, however, it was held that the requisitioning of certain ships merely resulted in their not being able to sail for a certain number of days, and the compensation was paid in lieu of the value or the use which they would have been to their owners in their profit earning capacity during those days. In lieu of that receipt, the money was paid to the owners. It was pointed out that the payment in that case was made towards loss of profits of a going business, which business had not been destroyed as a source of income. This is what Hidayatullah J. said (page 401)**: This ruling was strongly relied upon by the department as one which laid down a principle applicable here. We do not agree. The payment there was made towards loss of profits of a going business, which business was not destroyed. As a source of income, the business was intact, and the business instead of being worked for the whole period, was worked for a period less by a few days and the profit of that period was made up. That may be true if one is going to determine standard profits of a particular period, because what is paid goes to profits in the perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, Shaw Wallace Co. were agents for certain oil companies and earned a commission. These oil companies terminated the agency and paid a large sum as compensation. It was held that this was not a revenue receipt. It was nobody's case there that Messrs. Shaw Wallace Co. had entirely stopped their business. They had always been doing a variety of businesses and are still doing so. It is sufficient if a particular business had been totally stopped, and in this particular case the freight brokerage business of the assessee and/or his firm had been completely stopped during the relevant period. It was not stopped by any act on behalf of the shipping company which itself was compelled to stop its business of carrying freight from the Burma ports. In my opinion, therefore, the amount paid cannot be said to have been compensation for the loss of profit but was, at the highest, a voluntary gift which was paid owing to the generosity of the shipping company. In my opinion, therefore, it cannot be described as a revenue receipt. The second branch of the argument of Mr. Pal was based on certain insurance cases. It was argued that where the assessee had effected an insurance agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be seen that the basic reason for bringing such compensation into the net of taxation is that the parties had expressly agreed that the money that would be received would represent profits. It was inherent in such policies that the assessee expected to earn profit but was prevented from doing so by some overriding reason and, therefore, an amount was paid in lieu of profits. It is comparable to the class of cases I have mentioned above where the business continues but by some overriding reason profit cannot be earned. The situation in the present case is, however, entirely different. Even if there was any doubt as to what exactly the payment of ₹ 5 lakhs represented, it is now laid at rest by the findings of fact that have been placed before us upon remand. The company itself has admitted that the payment was made as a personal gift to the assessee. It may have been calculated on the possible loss that had been suffered, but it is obvious that there was no question of any legal liability on the part of the company to pay or any legal right on behalf of the assessee to receive payment. It was paid as a personal gift in consideration of the long association of the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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