TMI Blog1973 (4) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the court was delivered by B. P. BERI C.J.-At the instance of the Commissioner Income-tax, Rajasthan, Jaipur, this court directed the Income-tax Appellate Tribunal, Delhi Bench " B ", to refer the following question under section 66(2) of the Indian Income-tax Act, 1922, for answer by this court, namely : "Whether, on the facts and in the circumstances of the case the Income-tax Appellate Tribunal was right in holding that the sum of Rs. 62,204 received by the assessee in 1958 was a capital receipt not liable to tax ? " Because the learned counsel for the parties in the course of addresses often disagreed on the questions of facts we can do no better than relate the facts as agreed upon between the parties before the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent decided to cancel the manufacture or distribution of liquor or other excisable articles and accordingly also decided to terminate the arrangement to pay compensation or cash grants to the thikanedars of the jagirs. It was however, clarified by a letter dated the 10th of August, 1956, by His Highness the Rajpramukh of Rajasthan that the compensation payable in respect of the period prior to the issue of the aforesaid termination order will continue to be paid up to the date preceding the date of resumption of his jagir. The assessee accordingly received a sum of Rs. 62,204 for the period from July 18, 1952, to February 16, 1954. The assessment year concerned is 1958-59, for which the relevant previous year was the financial year ending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incess Ruby Rajiber Kaur v. Commissioner of Income-tax, Commissioner of Income-tax v. Sardar C. S. Angre, Raj Kishen Prem Chandra. Jain v. Commissioner of Income-tax and Senairam Doongarmall v. Commissioner of Income-tax. He also distinguished the authority relied upon by the Tribunal, namely, Seitairam Doongarmall v. Commissioner of Income-tax . Mr. C. L. Agarwal, appearing for the legal representative of the deceased assessee, Rao Kalyan Singh, urged that this is a case where the source of income was completely wiped out and, therefore, the sum of Rs. 62,204 was a capital receipt and not a revenue receipt. It would have been another matter, added the learned counsel, had the interruption been of a temporary nature without extinguishing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which, though they may depend to a very great extent on the particular facts of each case, do involve conclusions of law to be drawn from those facts. (See Commissioner of Income-tax v. Rai Bahadur Jairam Valji ). " Similar thoughts find expression in Collins (H. M. Inspector of Taxes) v. Firth Brearley Stainless Steel Syndicate at page 570 : " In these cases it must be, if not entirely, very largely a question of fact, because the line which separates the two classes of cases, as the Lord Justice Clark said in the Californian Copper Syndicate case , is difficult to define and each case must be considered according to its facts." There has, however, been one test which has been consistently applied for the purposes of determining whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinction 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. In other words, where what has been received was compensation for the revenue yielding asset then the character of the receipt cannot be anything but capital. If we are to employ an age old simile that if the compensation is for the hen that lays the egg and not for the egg itself then it cannot be but capital. The short but interesting question that emerges for our consideration in the light of these tests in the circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question such as the one before facts of each case influence the decision thereof a discussion of the number of cases cited before us is not necessary because we have studied these cases and, their facts do not directly assist us. The principle that we have found helpful in resolving the controversy before us has been consistently followed in all the cases cited before us and suffice it to say that when the source is destroyed and compensation is paid on account of such destruction it is capital. In the case before us the right to levy the excise was taken away from the assessee and in lieu thereof he was paid, certain compensation and its character therefore cannot be but that of capital. The answer to the question, therefore, is that o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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