TMI Blog1971 (10) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. We shall now refer to the material facts found by the Income-tax Appellate Tribunal as can be gathered from the case stated. The assessee was assessed as an individual The relevant assessment year is 1955-56, the accounting period for the same ended on Asad Sudi 1, S.Y. 2011. The assessee was instrumental in discovering the existence of kankar deposits in Jind State. He also brought about an agreement between one Shanti Prasad Jain and the erstwhile State of jind, now a part of Punjab State, for the acquisition of sole and exclusive monopoly rights of manufacturing cement in the said Jind State. That agreement was entered into on April 2, 1938. The same was to remain operative for a period of 25 years, which term was liable to be extended to 100 years at the option of the said Shanti Parsad Jain or his nominee. Shanti Prasad Jain transferred his rights under that agreement to a public limited company by name M/s. Dalmia Dadri Cement Ltd. on May 4,1938. The assessee was one of the promoters of the said company. For the services rendered by the assessee, the Dalmia Dadri Cement Co. by an agreement dated May 271, 1938, agreed to pay him a commission of I % on the yearly n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is not the case of the revenue that the assessee was engaged in any business. There is no evidence to show that he was a business man. His discovery of kankar as well as his part in bringing about the agreement mentioned earlier were stray acts, possibly occasioned by fortuitous circumstances. Business, as understood in the income-tax law, connotes some real, substantial and systematic or organised course of activity or conduct with a set purpose--see the decision of this court in Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax. By this statement we do not mean to say that under no circumstance a single transaction can amount to a business transaction. But this is not one such. Herein, we are dealing with the stray activity of a non-business man. Hence it is difficulty to agree with the revenue in its contention that the agreement entered into by the assessee with the Dalmia Dadri Cement Co. should be considered as a business activity. In the determination of the question whether a particular receipt is capital or an income, it is not possible to, lay down any single test as infallible or any single criterion as decisive. The question must ultimately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments were determined as at 31st December, 1927, and each party released the other from all claims thereunder. The question was whether this sum of pound 450,000 was a revenue receipt on which income-tax could be levied against the assessee. The matter came up before Finlay J. His Lordship held against the Crown. According to him the sum received was not a revenue receipt. This decision was reversed by the Court of Appeal but was restored on a further appeal by the House of Lords. Finlay J., in the course of his judgment, formulated the questions to be considered by him in these terms : " I agree with Mr. Latter that there are three questions here. The first is : What was this payment for ? The second is : If a payment for future rights, is it assessable ? The third question is : Ought it to go into the year 1927 ?" The learned judge's answer to the first question was that it was a payment for future rights. He held that it was really a payment for cancelling such rights as subsisted in the assessee between 1928 and 1940. Having answered the first question in that manner the learned judge held on the second question that it was not assessable. In arriving at that conclusion h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secure, or money received for the cancellation of, so fundamental an Organisation of a trader's activities can be regarded as an income disbursement or an income receipt ... In my opinion that asset, the congeries of rights which the appellants enjoyed under the agreements and which for a price they surrendered, was a capital asset." It is now well-settled that a distinction has to be drawn between a payment made for past services or discharge of past liabilities and that made for compensation for termination of an income producing asset. The former does not lose its revenue nature but the latter being a payment for destruction of a capital asset, must be considered as capital receipt. The distinction between a capital receipt and a revenue receipt came up for consideration before this court in Senairam Doongarmal v. Commissioner of Income-tax . The assessee therein owned tea estates consisting of tea gardens, factories and other buildings, and carried on a business of growing and manufacturing tea. The factory and other buildings on the estate were requisitioned for defence purposes by the military authorities. The assessee continued to be in possession of the tea gardens an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n results in loss of what may be regarded as the source of the assessee's income, the payment made to compensate for cancellation of the agency agreement is normally a capital receipt. These decisions lay down the tests to be applied in distinguishing a capital receipt from a revenue receipt. With the guidance thus afforded, let us now take a second look at the facts found for answering the question referred. The assessee, possibly, by some fortuitous circumstance discovered kankar in some place in the Jind State. This circumstance gave him an opportunity to bring about an agreement between the State of Jind and Shanti Prasad Jain and when Shanti Prasad Jain transferred his right to a new company, in the formation of which the assessee had a hand, he was promised certain yearly commission on the net profits earned by the company. None of these activities of the assessee can be considered as a business activity but yet he did acquire an income-yielding asset as a result of his activities. But the compromise decree destroyed that asset and in its place he was given Rs. 70,000 as compensation. This payment was neither in respect of the services rendered by him in the past nor towards ..... X X X X Extracts X X X X X X X X Extracts X X X X
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