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TMI Blog2010 (4) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... nafter referred to as the "compensation bonds") and U. P. Zamindari Abolition Rehabilitation Grant Bonds (hereinafter referred to as the "rehabilitation bonds") wherein compensation was payable to bond holders or their successors in equal annual instalments spread over 40 years. The bonds were transferable. The compensation bonds were interest-bearing whereas the rehabilitation bonds were without any interest. 2. The petitioner Anand Babu Agarwal in the year 1970 purchased compensation bonds of the face value of Rs. 3 lakhs and rehabilitation bonds of the face value of Rs. 5 lakhs for Rs. 99 thousand and Rs. 98 thousand, respectively. The interest received from the compensation bonds was duly disclosed by the petitioner for all asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid order dated December 17, 1982, and the order dated February 2, 1982, have been impugned by the petitioner in the present writ petition. 4. We have heard Sri Ravi Kant, learned senior advocate assisted by Sri Manoj Pandey, learned counsel appearing on behalf of the petitioner and Sri Shambhu Chopra, learned standing counsel. 5. The only question involved in the present writ petition is whether the excess amount of Rs. 28,224 received by the petitioner as compensation under the bonds over and above the purchase price of the bonds was a capital receipt or a revenue receipt liable to tax. 6. The submission of Sri Ravikant is that the compensation received by the petitioner is in the nature of capital receipt and, therefore, the contrary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales and purchases of bonds. In the above circumstances, it was held that the investment made by the assessee in the bonds was with an eye to earn profit and, as such, the receipt of such excess amount on the capital investment would be accountable as income. 10. In the case at hand, the bonds were purchased by the petitioner in the year 1970 and till the relevant assessment year under consideration, i.e., 1979-80 no further sale or purchase of any such bonds was made by him. It was a single transaction. Therefore, it is a clear case where the petitioner was not involved in the business of sales and purchases of such bonds and he was not a dealer in securities. Therefore, the decision of the Bombay High Court in CIT v. Scindia Workshop L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ratio of the law laid down in Andrew Scoble v. Secretary of State for India [1903] 4 TC 618 wherein Lord Lindley of the House of Lords had observed that such annual payment was nothing more than the payment of equal instalments of the purchase money with interest and that such instalments were not at all profits or gains but were partly payments of principal money and partly profit in the shape of interest. 14. A similar view was also expressed by the Division Bench of the Karnataka High Court in the case of Syndicate Bank [1986] 159 ITR 474 which also related to the compensation and rehabilitation bonds issued on the abolition of the zamindari in U.P. and the same view as in Maharashtra Apex Corporation Ltd. [1979] 116 ITR 616 (Karn) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annual instalments which were payable to the original bond holders as the said right stood assigned to him. 16. In view of the aforesaid facts and circumstances, we would prefer to subscribe to the ratio laid down by the two Division Benches of the Karnataka High Court. We accordingly hold that the compensation in the form of annual instalments received by the petitioner under the bonds is in the nature of capital receipt and is not taxable irrespective of the fact that the same happened to be in excess of the purchase value of the bonds. 17. Accordingly, we allow the writ petition and issue a writ of certiorari quashing the impugned orders dated December 17, 1982 and February 2, 1982 (annexures Nos. 8 and 6, respectively) passed by res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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