TMI Blog1999 (3) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt was delivered by M. B. SHAH J.--- This appeal is filed against the judgment and order dated September 8, 1993, passed by the High Court of Calcutta in Income-tax Reference No. 91 of 1988. The court allowed reference application and answered the following question referred to it in the negative and in favour of the Revenue : "Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in confirming the decision of the Commissioner of Income-tax (Appeals) that the receipt of Rs. 29,47,500 by the assessee from the receiver of the hotel in the course of the assessee's hotel operation business, is a capital receipt?" The said question arose in the income-tax assessment of the assessee-company for the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he terms of the debenture dated January 7, 1974, made between ISI on one part and Common Wealth Development Finance Company Limited on the other part. On the basis of the said appointment of the receiver, the receiver executed the supplemental agreement in favour of the appellant which, inter alia, provides that : "9. The operator hereby undertakes and agrees with the receiver as follows : (a) That article XVIII of the principal agreement shall henceforth cease to have any force and effect ; (b) That the receiver shall, subject to the provisions of clause 8 thereof, be at liberty at any time hereafter to sell or otherwise dispose of the said property at such price terms as he may deem fit and shall not be under any obligation of procu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any of its nominee or affiliates." On the basis of the said agreement, the assessee has received a sum of Rs. 29,47,500 from the receiver after the sale of the hotel. The question which was considered by the income-tax authorities was whether the receipt of the said amount is capital receipt or revenue receipt. The Income-tax Officer arrived at a conclusion that it was a revenue receipt, the Commissioner of Income-tax (Appeals) held that it was a capital receipt, the Tribunal confirmed the said finding, on a reference to the High Court, the High Court arrived at a conclusion that it was a revenue receipt assessable to income-tax as business income for the assessment year 1979-80. Hence, this appeal by special leave by the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the hotel to any other person, the same was required to be offered first to the assessee (operator) or its nominee. This right to exercise its option was given up by a supplementary agreement which was executed in September, 1975, between the receiver and the 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 the operator (assessee) for the purpose of operating and managing the hotel or otherwise, and in its return, agreed consideration was as stated above in clause X. On the basis of the said agreement, the assessee has received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quently engaged the attention of the courts. It may be broadly stated that what is received for loss of capital is a capital receipt: what is received as profit in a trading transaction is taxable income. But the difficulty arises in ascertaining whether what is received in a given case is compensation for loss of a source of income, or profit in a trading transaction." After considering various decisions it was further held as under: "These cases illustrate the principle that compensation for injury to trading operations, arising from breach of contract or in consequence of exercise of sovereign rights, is revenue. These cases must, however, be distinguished from another class of cases where compensation is paid as a solatium for loss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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