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TMI Blog1932 (3) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... 1928 as compensation for the termination of certain agencies. 2. The respondents carry on business in Calcutta as merchants and agents of various companies, and have branch offices in different parts of India. For a number of years prior to 1928 they acted as distributing agents in India of the Burma Oil Company and the Anglo-Persian Oil Company, but had no formal agreement with either company. In or about the year 1927 the two companies combined and decided to make other arrangements for the distribution of their products, The respondents' agency of the Burma Company was accordingly terminated on December 81,1927, and that of the Anglo-Persian Company on June 30 following, Sometime in the early part of 1928 the Burma Company paid to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal receipt and therefore not income, profits or gains within the meaning of the Income-tax Act ? (b) If it could be said to be income, profits or gains within the meaning of the Act, was it liable to be assessed under either of the Sections 10 and 12 of the Act, as much as (I) it was not the profits, or gains of any business Carried on by the aasessees within the meaning of Section 10 of the Act, nor (2) income, profits or gains from other sources within the meaning of Section 12 of the Act. (c) In the alternative, was not the payment of ₹ 9,13,361 an ex gratia payment in the nature of a present from the oil companies in question and was it not therefore exempt under Section 4 (3)(vii) of the Act? 6. The reference was heard by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. In one part of his judgment the Chief Justice seems to hold that the " compensation for loss of these agencies is a receipt in respect of a capital asset in the nature of goodwill," but it has been objected with some force that there is nothing upon which this finding can be based. There was, so far as the facts disclose, no transfer of the goodwill of the respondents, and no agreement by them not to compete with the new selling agency of the companies. 10. In another part of the judgment the payment seems to be regarded as in the nature of compensation in lieu of notice. But here again their Lordships think that there are no facts to support such a conclusion, and they doubt if Section 2C6 of the Indian Contract Act, upon whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fruit of a tree, or the crop of a field. It is essentially the produce of something, which is often loosely spoken, of as "capital." But capital, though possibly the source in the case of income from securities, is in most cases hardly more than an element in the process of production. 13. The sources from which the taxable income under the Act are to be derived are enumerated in Section 6, which runs as follows:-- Save as otherwise provided by this Act, the following heads of income, profits and gains, shall be chargeable to income-tax in the manner hereinafter appearing, namely :- (i) Salaries. (ii) Interest on securities. (in) Property. (iv) Business. (v) Professional earnings. (vi) Other sources. 14. The claim of the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... death or injuries, or in payment of any insurance policy, or as the accumulated balance at the credit of a subscriber to any such Provident Fund. 16. Their Lordships do not think that any of these sums, apart from their exemption, could be regarded in any scheme of taxation of income, and they think that the clause must be due to the over anxiety of the draftsman- to make this clear beyond possibility of doubt. They cannot construe it as enlarging the word "income " so as to include receipts of any kind'-, which are not specially exempted. They do not think that the clause is of any assistance to the appellant. 17. Following the line of reasoning above indicated, the sums which the appellant seeks to charge can, in their lor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the assessee. No objection has been taken to the form of the answer or to its sufficiency, and it would seem unnecessary therefore to deal with the other two questions, Their Lordships will only add that the reasoning of this judgment would apply equally if the appellant based his claim on head (vi) "other sources' and the Corresponding provisions of Section 12. 21. With regard to the claim to exemption under Section 4(3)(vii), their Lordships think that the decision in the case of Turner Morrison & Co., In re, to which reference has been made above, may need re-consideration in the light of this judgment. In their Lordships' view the expression "receipts arising from business" in that clause must mean ..... X X X X Extracts X X X X X X X X Extracts X X X X
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