TMI Blog2004 (9) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... Income from other sources. " 2. The facts of the case leading to this appeal briefly are that the assessee-company was incorporated in 1962. It entered into a Promotion Agreement on 30-9-1963 with M/s. Meturit AG, a company which was hundred per cent subsidiary of a German Company, Krupp Widia GmbH which, in turn, was a hundred per cent subsidiary of another German Company, Fried Krupp Essen, Germany. In terms of this Promotion Agreement, a manufacturing company was floated in India by the name of Widia (India) Ltd. at Bangalore. 3. In terms of the Promotion Agreement, M/s. Meturit AG were to hold 60% of the paid-up capital of M/s. Widia (India) Ltd., "Sak Associates" 21.4% and the balance by general public. In keeping with the policies of Govt. of India operative from time to time and in view of the expansion of the licensed capacity of M/s. Widia (India) Ltd., the shareholding by M/s. Meturit AG came to be reduced from 60% to 51%. The shareholding pattern for the assessment year under consideration was as under : ( a )M/s. Meturit AG-51% ( b )Sak Associates-26% ( c )General public-23% 3.1 In terms of the Promotion Agreement, in the Articles of Association ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee-company and its associates on the one hand and Meturit and its associates on the other. For this purpose, the share capital of M/s. Widia (India) Ltd. had been divided in three categories : ( i ) A series equity shares to be held by the foreign partner (Promoter and its partners, associates etc.) ( ii ) B series equity shares to be held by the assessee-company, its associates etc. ( iii ) C series equity shares to be held by Indian public. 5.2 The Assessing Officer found that both clause 9 of Promotion Agreement and the Articles of Association of M/s. Widia (India) Ltd. in clauses 30 to 54 had restricted transfer of A series equity shares and B series equity shares. The salient features of the Articles of Association were : " A class equity shares can be transferred to ( i ) any other member holding A series equity shares, or ( ii ) to any subsidiary company of Meturit, or ( iii ) any Company or companies directly or indirectly controlled by Fried Krupp, Essen. If the aforesaid are not willing to purchase or to take a transfer of the shares or any of them, the same shall be offered to or may be transferred to any member holding B series equity sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessing Officer then noted the reply of Fried Krupp dated 21-2-1994 asserting that there was no change in the shareholding of Widia (India) Ltd.; a meeting between the assessee-company and its partner during 25-4-1994 to 29-4-1994. On 8th May, 1994, a note on the discussion held in Dusseldorf on 29-4-1994 was prepared. This note stated that there was no violation of any agreement but at the same time, Fried Krupp and Krupp Widia GmbH showed willingness, in view of the long association of the assessee-company, to pay an unconditional sum of DM 4 millions. The Assessing Officer further noticed that in the letter dated 11-5-1994 Shri Autar Krishan talked about the unconditional payment and quantification of such payment as the only major difference between the two companies. On the same date, a tele-fax was received by Shri Autar Krishan wherein it was stated that the offer made in Dusseldorf was a final offer to cover the "nuisance factor and the necessity for the redrawing the shareholder agreements to avoid any further misinterpretation between the parties". The Assessing Officer noted that another important correspondence was dated 28-10-1994 being a letter addressed to Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter-partner interest in the business (page 3) ( d )1963 Promotion Agreement shall stand terminated. ( e )SAK shall acknowledge and agree to the transfer the right, duties, obligation, assets, liabilities under the Promotion Agreement." 7.1 According to the Assessing Officer, the amount received by the assessee-company was for the breach of trust stipulated in the Promotion Agreement and the Articles of Association. The assessee s business operation through the joint venture company did not have any direct bearing. In other words, the assessee s contention that payment of DM 10.5 million made by Krupp was voluntary and there was no transfer of shares and therefore the said amount was not open for taxation, did not have any bearing when the assessee did not want to open up the corporate veil. But on perusal of Promotion Agreement dated 30-9-1963 and Settlement Agreement dated 20-12-1994, it was evident that the payment had been made to the assessee-company in lieu of the surrender of their rights under the Promotion Agreement especially their right of presumption in respect of the shares of M/s. Widia (India) Ltd. Another very important right surrendered by the assessee-comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and business in hard metals had commenced. No part of Promotion Agreement was materially changed and the Settlement Agreement in 1994 only formalized the existing state of affairs. The shareholding pattern of M/s. Widia (India) Ltd. remained unchanged, Meturit AG held A series shares, assessee-company held B series shares and public held C series shares and their shareholding percentage was to be 51%, 25.3% and 23.5% respectively. The company s name, trade-mark, manufacturing activity and business territory remained unchanged. The assessee-company argued that it had not lost anything and money was received from Fried Krupp to avoid unnecessary litigation and nuisance value created by the assessee-company. Fried Krupp wanted to dispose of its 100% subsidiary during December 1994 and it did not want to be involved in any prolonged and protracted litigation or arbitration. The assessee received money as one time exception and, therefore, it was capital receipt. The assessee argued that Krupp Widia GmbH was finally sold to U.S. Company, Cincinnati Milacron which did not/do not have any competitive business in India against Widia (India) Ltd. Thus, the original competitive clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 140 ITR 159 3 (Bom.) for the proposition that if there was break of the collaboration agreement, the receipt was capital receipt. 11. During the course of proceedings before the Commissioner (Appeals), the assessee also furnished copy of judicial opinion given by Mr. T.N. Pandey, retired Chairman of the Central Board of Direct Taxes. The ld. Commissioner (Appeals) has reproduced the aforesaid judicial opinion. According to that opinion, the payment was made to ward off controversies and for peaceful disposal of the interest Fried Krupp had in Krupp Widia GmbH and other subsidiaries. The assessee argued that while determining the question as to whether a receipt was chargeable to tax, the legal character of the transaction i.e. the source of the receipt could not be ignored. Reliance in this respect was placed on the judgments in Addl. CIT v. Ram Kripal Tripathi [1980] 125 ITR 408 1 (All.), CIT v. B.M. Kharwar [1969] 72 ITR 603 (SC) and CIT v. Purandas Ranchoddas Sons [1988] 169 ITR 480 (AP). It was relevant to examine whether the receipt could be said to arise from an adventure in the nature of trade or was of casual and non-recurring nature or came within t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Krupp Widia GmbH. Fried Krupp agreed to make payment to the assessee as per Settlement Agreement in order to avoid unnecessary and costly litigation and in order to have good relation. The shareholders agreement signed between the assessee-company and Meturit in 1994 were on the same terms as in Promotion Agreement of 1963. The only change, if at all it could be called a change, was that the parent company, Fried Krupp, washed off its hands which otherwise was not a party to Promotion Agreement 1963. The ld. Commissioner (Appeals) noted that Krupp Widia GmbH was subsequently purchased by USA Company, Cincinnati Milacron which did not have competitive business in India. The joint venture between Meturit and the assessee-company signed in 1963 had no right to prevent transfer of Krupp Widia GmbH to the US Company. Thus, what the assessee received was neither a compensation nor a damage but a fortuitous receipt which was purely discretionary in nature and not chargeable to tax as income. The receipt was not from a source and it was not out of a trading activity. It was not at all casual income because it was a voluntary payment entirely on the whim and discretion of the payer. It did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as the ld. Commissioner (Appeals) misconstrued the receipt in the hands of the assesee to be fortuitous receipt. The fact of the matter was that the receipt arose to the assessee for agreeing to give up its rights arising from 1963 Promotion Agreement. Accordingly, the entire case law relied upon in the assessee s paper book was not applicable because the same was based on incorrect premise as to the nature of the receipt. The ld. Departmental representative argued that the concept "Income" was very wide and it embraced all receipts that could be considered to be in the nature of income. He referred to the detailed discussion in the commentary of Chaturvedi Pithisaria s "Income-tax Law" , 5th Edition - Vol. I, page 413. He emphasised that even voluntary and gratuitous payments connected or linked with an office, occasion or occupation shall be covered by the description "income". He referred to the judgment of the Hon ble Kerala High Court in the case of Father Epharam v. CIT [1989] 176 ITR 78 and submitted that any monetary return "coming in" could be described as income. The ld. Departmental Representative argued that there were a number of decis-ions to the effect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income should be earned; if there was unearned income, the same could be assessed under the head "Income from other sources". For that purpose, the ld. Departmental Representative relied on the judgments reported in CIT v. D.G. Goenka [1981] 129 ITR 260 (Bom.) and in Devidutt Dhurmal Bajaj v. CIT [1981] 131 ITR 16 (Bom.). 16. The ld. CIT (DR) argued that the receipt in question in the case of the assessee-company was not in the nature of windfall. The assessee received it on account of its business connection in relation to the business of M/s. Widia (India) Ltd. There were certain commitments and obligations of the foreign parties in relation to the arrangement of the assessee with them in connection with the business of M/s. Widia (India) Ltd. The assessee was paid as there was breach of contract on the part of the foreign companies. The ld. Departmental Representative referred to page 438 of the book ( supra ). He referred to the judgment of the Hon ble Supreme Court in CIT v. Kamal Behari Lal Singha [1971] 82 ITR 460 and argued that in order to find out whether any receipt is a capital or revenue receipt, one has to see what it is in the hands of the receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Widia (India) Ltd. It continued to do so even after 1994 Settlement Agreement and Shareholders Agreement. M/s. Widia (India) Ltd. was incorporated on 23-7-1964 and was soon turned into a successful company. There was a news item in a German newspaper on 17-1-1994 suggesting that Fried Krupp Essen, Germany, had plans to sell Krupp Widia GmbH as a whole to a third party. This news item was faxed to the Managing Director of the assessee-company by Shri R. Srinivasan, M.D. of Widia (India) Ltd. Thereupon, the Managing Director of the assessee-company addressed a letter dated 19-1-1994 to the Managing Director of Krupp Widia GmbH and referred to the statement of the Chairman of Fried Krupp Essen, Germany, that had been referred to in the newspaper. He made an offer to purchase the shareholding of Meturit AG in M/s. Widia (India) Ltd. Thereafter, certain correspondence ensued between the Managing Director of Krupp Widia GmbH and the Chairman of Fried Krupp Essen, Germany, on the one hand and the assessee-company on the other hand. Thus, the negotiations culminated into two agreements viz. Settlement Agreement and Shareholders Agreement being signed on 20-12-1994. 18. The ld. Coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se between Meturit AG, Krupp Widia GmbH and the assessee-company. The ld. Counsel argued that there was hardly any change to the Promotion Agreement of 1963 made by Settlement Agreement and Shareholders Agreement signed on 20-12-1994. The only change, if at all it could be called a change, was that the assessee could not hereinafter look upon Fried Krupp Essen, Germany as the foreign collaborator. Krupp Widia GmbH would be the collaborator, but this company would be under the control of the new purchaser and not Fried Krupp Essen, Germany. The assessee-company had also to desist from taking any action by way of suit or otherwise based on the breach under the Promotion Agreement. The amount was paid to the assessee-company, a mutually agreed ad hoc amount, as a measure of goodwill for the breaking away of Fried Krupp Essen, Germany, from the collaboration agreement and freedom there-from and also the right to sell its subsidiary without any hindrance. The assessee-company s agreement with M/s. Meturit AG remained intact even after this change. Legally speaking, there had been no alteration in the Promotion Agreement or in the relationship between the assessee and M/s. Meturit AG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held by the Hon ble Supreme Court in Parimisetti Seetharamamma v. CIT [1965] 57 ITR 532 . In that judgment the Hon ble Supreme Court further held that the burden to prove that any receipt is income is on the revenue; thereafter, it would be assessee s burden to prove that the same is not chargeable to tax. The ld. Counsel argued that the facts of the case suggested that the assessee received voluntary and gratuitous payment from Fried Krupp Essen. It was settled legal position that voluntary payments received at the whim of the giver are not income. In support of this contention, the ld. Counsel placed reliance on the following judgments : ( a ) Siddhartha Publications (P.) Ltd. s case ( supra ); ( b ) Rani Amrit Kunwar v. CIT [1946] 14 ITR 561 (All.); ( c ) H.H. Maharani Shri Vijaykuverba Saheb of Morvi s case ( supra ); ( d ) Yuvrani Premkumari Yuvraj Udaybhansinghji s case ( supra ); ( e ) Padmaraje R. Kadambande s case ( supra ); and ( f ) Pran Jiban Jaitha s case ( supra ). 22.1 The ld. Counsel argued that the ld. Departmental Representative was not justified in his arguments that even if the payment was received for no consideration, it c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d counsel for the assessee relied on Morley ( Inspector of Taxes ) v. Tattersall [1939] 7 ITR 316 (CA), followed in ( CIT v. Motor and General Finance Ltd. [1974] 94 ITR 582 (Delhi)(DB); CIT v. A.V.M. Ltd. [1984] 146 ITR 355 (Mad.) to contend that the quality and nature of a receipt for income-tax purposes were fixed once and for all when the subject of the receipt was received and that no subsequent operation could change the nature of the receipt. Learned counsel for the respondent countered the argument and cited CIT v. Karam Chand Thapar [1966] 222 ITR 112 (SC), where this Court noted the decisions in Jay s - the Zall ER 762 (KB), and Elson (Inspector of Taxes) v. Prices Tailors Ltd. [1963] 1 All ER 231 (Ch D) with approval as limiting the principle enunciated in Tattersall s case [1939] 7 ITR 316 (CA). It was held by this court that the proposition enunciated in Tattersall s case [1939] 7 ITR 316 (CA), was not absolute and that in given cases amounts which were not received initially as trading receipts could eventually be regarded as business income by reason of subsequent events. The subsequent event must be such that a different quality is imprinted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there was no colourable device. The ld. counsel placed reliance on the decisions reported in Chemical Aromatics v. IAC [1986] 18 ITD 298 (Bom.), Union of India v. Playworld Electronics (P.) Ltd. [1990] 184 ITR 308 (SC), CIT v. Arvind Narottam [1988] 173 ITR 479 (SC) and Banyan Berry v. CIT [1996] 222 ITR 831 (Guj.) in this respect. 27. The ld. Departmental representative in his rejoinder argued that various case law related to the definition of "income" relied upon by the counsel for the assessee did not apply on the facts and circumstances of the case. He argued that there was long standing business relationship between the payer and the payee. They were not strangers to each other. There was no question of Fried Krupp Essen agreeing to pay such a huge amount to the assessee-company for no reason at all. It was only when Fried Krupp Essen realized that it was obliged to make the payment that they settled the dispute by making payment of an amount mutually agreed upon. The amount was obviously paid for a breach of contract. The ld. Departmental representative relied in this respect on the judgment of the Hon ble Supreme Court in CIT v. Prabhu Dayal [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in is the Meturit holding in Widia (India) Ltd. As you know there are provisions in the Promotion Agreement which require either of the promoters to first offer their holding to the other promoter in case they are interested in the sale of their shareholding. The Promotion agreement also defines the Group which each promoter is supposed to constitute. I am sure that in keeping with our past excellent association Krupp will abide by these provisions. I look forward to hearing from you in this matter." 29. The Managing Director of Krupp Widia GmbH replied to Mr. Autar Krishna on 24th January, 1994. In this reply it was, inter alia, stated : "It has never been and, as far as I am concerned, will not be the intent of the shareholder to dispose of Meturit or having Meturit disposing of their shareholding in Widia (India) Ltd. The cooperation discussions encompasses all activities and shareholdings; thus, all activities of the Widia group are considered in cooperation agreements. Therefore, there will not be a change in our shareholding nor in our policies as regards Widia (India) Ltd. and/or SAK Industry is concerned. Be assured that the past excellent association between Krup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok the position that there was no change in the shareholding of Widia (India) Ltd., Meturit AG and Krupp Widia GmbH, because the Widia Group remained intact. From legal point of view Meturit AG had not expressed any intention to sell the shares of Widia (India) Ltd. to any third party. So, there was no reason whatsoever to ask Meturit AG to offer their shares to Sak Industries as provided for in clause 32 of the Articles of Association of Widia (India) Ltd. There was nothing contained in the wording of Article 12 of the Promotion Agreement also because no sale of the shares of Meturit AG of Widia (India) Ltd. had been planned. Mr. Autar Krishna responded vide his letter dated Ist March, 1994 to Dr. G. Cromme, Chairman, Fried Krupp Essen, with copy of Managing Director Krupp Widia GmbH, Meturit AG, and also to Mr. P.O. Eriksson, President CEO Sandvik AB Sweden. In this letter Mr. Autar Krishna reiterated that Fried Krupp Essen had committed a serious violation of the Promotion Agreement, particularly, Article 12 thereof. If there was a sale of Meturit AG, Switzerland, it involved transfer of A series equity shares of Widia (India) Ltd. being held by Meturit AG. Sandvik AB was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r having secured payment of the negotiated amount of DM 10.5 million. 33. From the arguments of the Revenue and the assessee during the course of hearing before us, we find that in a sense the respective arguments of the assessee-company on the one hand and Fried Krupp Essen, Krupp Widia GmbH and meturit AG on the other, have been replicated. While the Revenue has emphasized what the assessee-company contended in 1994 that there was a breach of trust, the learned counsel for the assessee has argued that there was no such breach and there was no legal obligation for Fried Krupp Essen to pay any damages or compensation or payment of any kind whatsoever to the assesee-company and therefore the payment of DM 10.5 million to the assessee-company was merely a voluntary and fortuitous payment to avoid nuisance created by the assessee-company which could have delayed disposal by Fried Krupp Essen of its hundred per cent subsidiary Krupp Widia GmbH in favour of U.S. party much beyond December 1994. As Fried Krupp did not want to be involved in any prolonged or protracted legal proceedings, it desired to have a smooth sailing and to buy peace by making one time payment. 34. On the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the judgment of Hon ble Bombay High Court in the case of CIT v. Tata Services Ltd. [1980] 122 ITR 594 1 . In that case there was an agreement of sale, entered into between one Anandji Haridas and the assessee Tata Services Ltd. for certain consideration. Out of the agreed consideration, a sum of Rs. 90,000 had been paid as earnest money. Later on, certain dispute arose between the parties and the matter was settled on Tata Services Ltd. receiving a sum of Rs. 5,90,000 and transferring and assigning its rights under the agreement in favour of a third party M/s. Advani and Batra. On these facts the Hon ble Bombay High Court in their judgment in Tata Services Ltd. s case ( supra ) : "It is no doubt true that at one stage Anandji Haridas wanted to treat the transaction as cancelled, a position which was not accepted by the assessee. The assessee, however, had throughout been insisting that the agreement of sale is a subsisting agreement and that it would be constrained to file a suit for specific performance of that agreement for sale. What-ever may have been the controversy between Anandji Haridas and the assessee prior to 23rd September, 1963, when the assessee executed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure in hand of payer. Whether it is capital expenditure or revenue expenditure would have to be determined having regard to the nature of the transaction and other relevant factors - Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 (SC); There may easily be cases where, although in the hands of the vendor a particular receipt may be capital receipt, yet qua the purchaser it may be a revenue expenditure - CIT v. Kolhia Hirdagarh Co. Ltd. [1949] 17 ITR 545 (Bom.)." 38. A perusal of the Settlement Agreement dated 20th December, 1994, between Fried Krupp Essen, Krupp Widia GmbH, Meturit AG, the assessee-company and the group of persons represented by Mr. Autar Krishna, it is seen that the settlement was of the dispute arising between the assessee-company and Fried Krupp Essen because the assessee-company had alleged that Fried Krupp had breached the Promotion Agreement by the proposed sale by Fried Krupp of all quotas of Krupp Widia (including all of the capital stock/quotas of Meturit). On fried Krupp Essen agreeing to pay to the assessee-company a sum of DM 10.5 million, the assessee-company agreed and consented to the transfer by Fried Krupp Essen, termination of P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... productive, but it must be one whose object is the production of a definite return excluding anything in the nature of mere windfall. Thus, income has been likened pictorially to the fruit of a tree, or the crop of a field." 40. The same view has been taken by the courts in a number of other judgments, some of which are as mentioned below : The ingredients of the income are ( i ) it must be a periodical monetary return, ( ii ) it must be with regularity or expected regularity, ( iii ) from a definite source, and ( iv ) it should not be receipt in the nature of a mere windfall. The word income is an expression of elastic ambit and definition given in section 2( 24 ) is not exhaustive. In such circumstances one may consider the common parlance meaning of the word income - CIT v. Ramdeo Samadhi [1986] 160 ITR 197 1 (Raj.). In the Oxford Dictionary income is defined as that which comes in as the periodical produce of one s work, business, lands or investments considered in reference to its amount and commonly expressed in terms of money - CIT v. Little s Oriental Balm Pharmaceuticals Ltd. [1950] 18 ITR 849 (Mad.). Only a periodical monetary return yie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught in the ambit of taxation by the provisions of section 10(3). In the case of Smt. Anand Bala Bhushan v. CIT [1996] 217 ITR 144 3 , the Hon ble Allahabad High Court have held that the words "all receipts" in section 10( 3 ) cannot enlarge the scope of the section. The Hon ble Court further held that the capital receipts are not envisaged within the ambit of section 10( 3 ) because even section 10( 3 ) cannot exist de hors the head of income provided for computation of income. The same view has been taken by Hon ble Calcutta High Court in the case of B.K. Ray (P.) Ltd. v. CIT [1995] 211 ITR 500 ; and the Hon ble Bombay High Court in the case of Cadell Wvg. Mill Co. (P.) Ltd. v. CIT [2001] 249 ITR 265. The Hon ble Supreme Court have, in their judgment in the case of Universal Radiators v. CIT [1993] 201 ITR 800 1 have held that exigibility to tax depends on a charge created by the Act and liability to pay tax on computation in accordance with the provisions in the Act. It, therefore, follows that section 10( 3 ) cannot enlarge the charge created by section 4 of the Act. The position more or less is well-settled now that a capital receipt cannot be assessed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chunduri Venkata Reddi v. CIT [1959] 35 ITR 87 (AP); Associated Oil Mills Ltd. v. CIT [1960] 40 ITR 118 (Mad.), P.L.M. Firm v. CIT [1968] 68 ITR 856 (Mad.); Bombay Burmah Trading Corpn. Ltd. v. CIT [1971] 81 ITR 777 (Bom.); J.R. Kimtee Sons v. CIT [1978] 115 ITR 190 (AP); CIT v. Bombay Burmah Trading Corpn. Ltd. [1986] 161 ITR 386 1 (SC); CIT v. Barium Chemicals Ltd. [1987] 168 ITR 164 2 (AP); and CIT v. Seshasayee Bros. (P.) Ltd. [1999] 239 ITR 471 3 (Mad.). For applying this test to the facts of the case before us, we find that the right, the assessee contested all along, was the right to purchase shares held by Meturit AG of Widia (India) Ltd., in the event of the proposed sale of Krupp Widia GmbH from Fried Krupp Essen to an outsider going through. This right was given up by the assessee on receipt of DM 10.5 million. In the case of the assessee before us if the assessee had succeeded to exercise its supposed right to purchase shareholding of Meturit AG in Widia (India) Ltd. that in itself would not have given rise to any income in the hands of the assessee but only created an income earning source in the hands of the assessee. It is importa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. It was agreed that the receiver would be at liberty to sell or otherwise dispose of the said property at such price and on such terms as he may deem fit and was not under any obligation, requiring the purchaser thereof to enter into any agreement with Oberoi Hotel Pvt. Ltd., for the purpose of operating and managing the hotel. On the basis of such agreement, the assessee received the amount of Rs. 29,47,500 and claimed that it was a capital receipt. The Assessing Officer rejected the claim but the CIT(A) and the Tribunal upheld it. The High Court arrived at the conclusion that it was a revenue receipt, assessable to income-tax as business income for the assessment year 1979-80. On appeal to the Supreme Court, the decision of the High Court was reversed. After considering the earlier judgments of Supreme Court viz., CIT v. Chari Chari Ltd. [1965] 57 ITR 400 ; CIT v. Rai Bahadur Jairam Valji [1959] 35 ITR 148; the Hon ble Supreme Court applied the earlier judgment of the Court in the case of Kettlewell Bullen Co. Ltd. v. CIT [1964] 53 ITR 261. The Hon ble Court also found support from the judgment in the case of Karam Chand Thapar Bros. (P.) Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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