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Issues:
1. Determination of whether compensation received by the assessee for requisitioning of premises constitutes a revenue, capital, or casual and non-recurring receipt. Analysis: The case involved the Shamsher Printing Press, a registered firm, whose premises were requisitioned by the Collector of Bombay under the Defence of India Rules. The main issue was whether the compensation received by the assessee, amounting to &8377; 57,435, for the requisitioning of the premises constituted a revenue, capital, or casual and non-recurring receipt. The Income-tax Officer treated a portion of the compensation as a revenue receipt, leading to a dispute between the Commissioner and the assessee. The Commissioner contended that the compensation represented loss of profits and was taxable as profits arising from the business of the assessee. On the other hand, the assessee argued that the compensation was awarded for damage done to the business, which should not be considered a revenue receipt. The Court noted that compensation under the Defence of India Rules was based on the same principles as the Land Acquisition Act, where damages for injuriously affecting the business or earnings of the person interested were considered. Therefore, if the compensation was for damages caused to the business or earnings, it could not be deemed a revenue receipt. The Court referred to a case involving the Glenboig Union Fireclay Co., Ltd., where compensation received for sterilization or destruction of a capital asset was not considered as profits earned in the course of business. Similarly, in the present case, if the compensation was for the sterilization of the capital asset (business premises), it could not be classified as income from the business. The Court rejected the argument that the compensation was assessed on the profits of the business, emphasizing that the nature of the payment received was crucial, regardless of the assessment method. Additionally, the Court discussed the Ensign Shipping Co. Ltd. case, where compensation for the loss of use of ships was considered a trading receipt as the government had the use of the ships. In contrast, in the current case, the government did not take over the business of the assessee but compensated for the injury caused to the business. The Court concluded that the compensation received was damages and not income arising from or in the course of the business, supporting the Tribunal's decision that the sum was not taxable as profits or gains from the business. In the final judgment, the Court held that the receipt of &8377; 57,435 was either a capital receipt or, if viewed independently of the business, a casual and non-recurring receipt. The Court answered the main question in the affirmative, considering the receipt as a capital receipt, and also affirmed that the receipt was of a casual and non-recurring nature, exempt from taxation under the Income-tax Act. The Commissioner was directed to pay the costs, and the reference was answered accordingly.
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