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TMI Blog1999 (3) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner 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 year ending on June 30, 1978, corresponding to the assessment year 1979-80 in the background of the fact that the assessee-company was operating, managing and administering many hotels belonging to others for a fee at several places, e.g., Cairo, Colombo, Kathmandu, Singapore, etc. As per the memorandum of association of the company, it was authorised to run hotels on its own account and also to operate, manage and administer hotels belonging to others for a fee. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 procuring or requiring the purchaser thereof to enter into any agreement with the operator for the purpose of operating and managing the hotel or otherwise ; (c) That should the receiver succeed in selling or disposing of the said property to any party, the principal agreement and this agreement shall upon completion of such sale as may then be made by the receiver, terminate and cease to have any force and effect ; (d) That the operator shall do, execute and deliver a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 question whether the receipt is capital or revenue is to be determined by drawing a conclusion of law ultimately from the facts of the particular case and it is not possible to lay down any single test as infallible or any single criterion as decisive. This court in the case of Karam Chand Thapar and Bros. P. Ltd. v. CIT [1971] 80 ITR 167, discussed and held that in CIT v. Chari and Chari Ltd. [1965] 57 ITR 400 (SC), it was held that ordinarily compensation for loss of an offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 the amount in question. The amount was received because the assessee had given up its right to purchase and/or to operate the property. Further it is loss of source of income to the assessee and that right is determined for consideration. Obviously, therefore, it is a capital receipt and not a revenue receipt. Learned counsel for the Revenue relied upon the decision in the case of CIT v. Rai Bahadur Jairam Valji [1959] 35 ITR 148 (SC), and submitted that the assessee had the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpensation 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 of office. Such compensation may be regarded as capital or revenue: it would be regarded as capital, if it is for loss of an asset of enduring value to the assessee, but not where payment is received in settlement of loss in a trading transaction." After analysing a number of cases, the court observed that the following satisfactory measure of consistency in the principle is disclosed: "Where on a consideration of the circumstances, payment is made to compensate a person for cancel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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