TMI Blog2003 (11) TMI 553X X X X Extracts X X X X X X X X Extracts X X X X ..... Weaving Mills Co. (P.) Ltd. v. CIT [2001] 249 ITR 265. 3. The learned Commissioner of Income-tax (Appeals) ought to have held that the amount of Rs. 5,30,00,000 received by the appellant was a receipt on capital account and could in no event be chargeable under the head Income from Other Sources ." 2. The short legal question requiring our adjudication thus is whether or not the CIT(A) was justified in holding that the impugned sum of Rs. 5,30,00,000, received by the assessee, constituted income from other sources and was taxable as such in the hands of the assessee. 3. This neatly identified legal question is set out in a rather narrow compass of material facts. The assessee is an individual and for a better part of her life she stayed in the tenanted premises at Samudra Villa, 18 Darabhshaw Road, Off Nepean Sea Road at Mumbai. In fact, this premises was taken on rent by her late father Dr. Bhaskar Yodh way back in 1942 at a then princely sum of Rs. 250 per month. On Dr. Yodh s death, i.e., on 31st October, 1971, his widow and mother of the appellant, i.e., Mrs. Saroj Yodh became tenant of this premises. In October, 1975, the landlord of this premises initiat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income as a "long term capital gain on account of surrender of tenancy rights" which, after allowing deduction under section 54F and under section 54EA, was worked out at Rs. 77,82,045. The assessee thus filed an income tax return on 4-7-1997 showing capital gain of Rs. 77,82,045 in addition to income from other sources amounting to Rs. 15,85,252. Although this return was initially accepted under section 143(1), the assessment was reopened on 7th July 2000 on the following ground : "It was noticed from the copy of agreement dated 3-2-1996 that the assessee is not a legal tenant and her eviction from the premises has been ordered by the Court in a suit petition. It was, therefore clear that the amount of Rs. 5.30 crores received by the assessee is not for the surrender of tenancy rights but was for eviction and therefore has to be treated as income liable to be taxed as casual receipts in her hands and taxed under the head income from other sources. Thus, the deduction claimed under sections 54EA and 54F of the Income-tax Act were not admissible to her. Further as per the provisions of section 54EA the investment in specified securities should be made within six months from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, it is very clear than amount of Rs. 5.30 crores which she has received was for eviction and not for surrendering of the tenancy rights. In other words, the amount of Rs. 5.30 crores was received for putting an end to protracted litigation and not for surrendering of her tenancy rights in the premises. The protracted litigation by way of pursuing the legal suits was pending against the Decree of Eviction passed by the Small Causes Court at Bombay. It has been held in the case of Bharat Forge Co. Ltd. v. CIT [1994] 205 ITR 339 (Bom.) that the compensation received for relinquishment/extinguishments of the right to pursue legal proceedings, cannot be treated as a capital gain chargeable to tax under section 45 of the Income-tax Act, 1961. In this view of the matter, I hold that the sum of Rs. 5,30,00,000 received by the assessee as compensation is a Casual Non-Recurring Receipt which is taxable under section 56. 10. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success, Learned CIT(A), in a rather brief order, rejected the arguments in appeal and concluded as follows: "9. I have gone through the facts of the case and I am inclined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipts as are in the nature of income can be covered by the scope of expression income from other sources . In the present context, it is also useful to examine whether a capital receipt can be subjected to tax as an income from other sources or not. 13. Section 2(24), which defines the expression income , gives only an inclusive definition. In other words, this section only sets out the nature of receipts which are specifically, and without prejudice to the generality of connotations of that expression, includible in the scope of income . Section 2(24)( vi ) lays down that "income includes... any capital gains chargeable to tax under section 45 of the Act." A plain reading of this provision makes it amply clear that only such capital gains, as may be chargeable to tax under section 45, are to be includible in the scope of income , so far as the provision of section 2(24)( vi ) are concerned. The question then arises whether capital receipts, not covered by the scope of section 2(24)( vi ), can also be included in income or not. 14. Dealing with the connotation of the expression income in the context of capital receipts not chargeable to tax under section 45, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from other source , therefore, hinges on the impugned receipt being held to be a receipt of revenue nature. 15. It is undoubtedly the settled legal position that the expression income is to be construed as of widest amplitude so as this expression may be given its natural and grammatical meaning, but then howsoever liberal or narrow be the interpretation of expression income , it cannot alter character of a receipt, i.e., convert a capital receipt into a revenue receipt or vice versa. There is no warrant for inference that even the most liberal interpretation of income can nullify or blur the all-important distinction between capital receipt or revenue receipt. We may, in this regard, also refer to the following observations by the Hon ble jurisdictional High Court, in the case of Cadell Weaving Mills Co. (P.) Ltd. (supra) . "It is well-settled that all receipts are not taxable under the Income-tax Act. Section 2(24) defines income. It is no doubt an inclusive definition. However, a capital receipt is not income under section 2(24) unless it is chargeable to tax as capital gains under section 45. It is for this reason that under section 2(24)( vi ) that the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question is a revenue receipt in nature. The revenue has at best made efforts to demonstrate that the receipt in question is not taxable as a capital gain and, therefore, it can only be in nature of revenue receipt. However, there is a glaring fallacy in this argument, since merely the fact that a receipt is not taxable as a capital gain would not imply, or even suggest, that such a receipt is revenue receipt. There can always be, and have been, cases in which receipts are held to be capital receipts in nature and yet not chargeable to tax as a capital gain." There is no material before us to even indicate, much less establish, that the receipt in question is in the nature of revenue receipt. Unless the receipt can be in the nature of revenue receipt, it cannot be said to be in the nature of income, and unless a receipt is in the nature of income, the same cannot be said to be in the nature of income from other sources . 17. We will now deal with the Assessing Officer s reliance on Hon ble jurisdictional High Court s judgment in the case of Bharat Forge Co. Ltd. v. CIT [1994] 205 ITR 339 (Bom.). In the impugned order the Assessing Officer has, inter alia , taken note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U.P. Government, it was not possible on the part of the assessee to purchase the property. For this transaction, the assessee did not have to part with any money or stock in trade. There was no cost involved in acquisition of the sum of Rs. 1 lakh. Hence, it could not be deemed to be a capital gain at all. The liability of the assessee could arise only if there would have been a transfer of capital asset and since there was no element of cost in the acquisition of Rs. 1 lakh, it could not answer the description or either a capital gain or revenue receipt. 3. We have scrutinized the facts as also the reasoning given by the Tribunal. We are in accord with the findings of the Tribunal that the amount of Rs. 1 lakh is not in the nature of capital gain or in the nature of the revenue receipt. There is no transfer in relation to a capital asset within the meanings of section 2(47) of the IT Act, 1961 and the amount of Rs. 1 lakh also does not confirm to the concept of the capital asset. . . . The Hon ble High Court then formed a view that on the facts and in the circumstances of the case, the Tribunal was right in holding that sum of Rs. 1 lakh received by the assessee is neither a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is a revenue receipt, cannot per se lead to the conclusion that the receipt in question is in the nature of income. There is no mention anywhere in the assessment order to the effect that the receipt in question was in nature of a revenue receipt or an income. It appears that the Assessing Officer has proceeded on the assumption that since the receipt in question is not a capital gain, but it is a receipt nevertheless, the same shall be taxable as an income from other sources. This is clearly a fallacious line of reasoning for the simple reason that, in view of the discussions in foregoing paragraphs, only revenue receipts can be said to be in the nature of income, and that the onus to demonstrate that a particular receipt is of revenue character rests on the taxing authorities. In our considered view, therefore, the Assessing Officer s reliance on the judgment of Bharat Forge Co. Ltd. s case ( supra ) is wholly misplaced. 18. The learned CIT(A) has dealt with the matter only at the surface level by observing that the "decision in the case of Cadell Weaving Mills Co. (P.) Ltd. ( supra ) is not applicable to the facts in the present case" and, therefore, he holds that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to undue hardships by being before the Assessing Officer twice and on account of erroneous advice she had received from her consultant on account of which she volunteered to pay tax on a capital receipt which is outside the ambit of income itself. It was also submitted that unless we decide as to whether the receipt in question is income or not, we cannot adjudicate on assessee s grievance that it is not exigible to tax as an income from other sources . 19. In our considered view, the fact that the assessee volunteered to pay tax on the impugned receipt as a capital gain is not really relevant at this stage because the assessee s offer has not been accepted by the taxing authorities and the assessee is not aggrieved of that rejection by the taxing authorities. As on today, assessee s income finally computed under the head capital gains is nil and the revenue is not in appeal against the same. It is useful to remember, as was held by the Hon ble Gauhati High Court in the case of Jeypore Timber Veneer Mills (P.) Ltd. v. CIT [1982] 137 ITR 415: "Parliament in its wisdom has conferred upon the Tribunal broad and sweeping powers but at the same time controlled the pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a basic and fundamental requirement that we must address ourselves to. It is useful to remember that a capital receipt, in principle, is outside the scope of income chargeable to tax and a receipt cannot be taxed as income unless it is in the nature of a revenue receipt or is specifically brought within ambit of income by way of specific provisions of the Act. We are, therefore, of the considered view that the receipt in question cannot be brought to tax unless the same is held to be a revenue receipt in nature or unless, in case it is held to be a capital receipt, there are specific provisions to artificially treat this capital receipt as income. It is not the case of the Revenue that there are any specific provisions to artificially treat this receipt as an income and, therefore, taxability of this receipt solely hinges on the nature of receipt, i.e., whether the receipt is capital receipt or revenue receipt. As observed by the Hon ble Supreme Court in the case of Parimisetti Seetharamamma v. CIT [1965] 57 ITR 532, "...the Act imposes a general liability to tax upon all income" but "the Act does not provide that whatever is received by a person must be regarded as inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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