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TMI Blog1972 (8) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... he site thereof on a long lease. On May 19, 1944, the Collector of Poona requisitioned the premises of the respondent under the Defence of India Act as from May 19, 1944, for the purpose of using them as store houses for foodgrains. Initially the requisition order covered the six sheds as well as the office of the respondent, but at the request of the respondent-firm the Collector agreed to allow it to remain in possession of the office premises. In October, 1944, the respondent made a claim for Rs. 1,85,200 on account of compensation for the requisitioned premises. In June, 1946, the Collector offered to pay compensation at the rate of Rs. 310 per month. The respondent feeling dissatisfied with the offer of the Collector, moved the Government for a reference to arbitration under the provisions of the Defence of India Act. The Civil Judge, Senior Division, Poona, was thereafter appointed arbitrator on November 10, 1947. The Government appointed its consulting surveyor as an assessor to help the arbitrator in determining the amount of compensation. As against that the respondent appointed an architect as its assessor. There was considerable difference in the estimates of the two ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 950-51, against the sum of Rs. 1,05,074. On being moved by the respondent, the Tribunal referred the following question to the High Court: " Whether, on the facts and in the circumstances of the case, the sum of Rs. 1,05,074 received by the applicant as compensation from the Government is taxable as income of the applicant or is a capital receipt in its hands?" The High Court held that the amount received by the respondent for the requisitioning of the six sheds or godowns was in the nature of capital receipt in the hands of the respondent-firm for the damage sustained in the profit-making apparatus. It was, in the opinion of the High Court, not a revenue receipt and, as such, not taxable. In appeal Mr. Ahuja on behalf of the appellant has assailed the judgment of the High Court and has urged that the sum of Rs. 1,05,074 received by the respondent was a revenue receipt and not a capital receipt as the amount represented the compensation payable for loss of earnings consequent upon the requisition of the sheds of the respondent. As against that, Mr. Hajarnavis on behalf of the respondent has urged that the amount in question was a capital receipt and the decision of the High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is a case of carrying on the same business on a smaller scale. Even this business was carried on by the assessee-firm in its usual name and style from the same office premises from which it used to carry it on prior to the requisition of the godowns by the Government...... If any injury was caused to the assessee's business, including the capital assets it held for the purpose of carrying on that business, it was to the volume of the business and not to the profit-making apparatus itself." In the light of the above findings of fact, we have no doubt that the amount received by the respondent for the loss of earnings was revenue receipt. It can hardly be disputed that if the respondent-firm had been earning profits as a result of its business during the years the premises in question remained under requisition, the said profit would have been treated as revenue receipt and liable to be taxed as such. The amount received in lieu of the profits which would have been earned if the premises had not been requisitioned, in our opinion, would partake of the same character as the profits. The present is not a case wherein the respondent-firm was permanently deprived of a source of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the application of that test." The above observation was quoted with approval by this court in the case of Senairam Doongarmall v. Commissioner of Income-tax and it was held that it is the quality of payment that is decisive of the character of the payment and not the method of the payment or its measure as makes it fall within capital or revenue. Reliance has been placed by Mr. Hajarnavis on the ratio of the decision of this court in the case of Senairam Doongarmall. The assessee-family in that case owned a tea estate consisting of tea gardens, factories and other buildings and carried on the business of growing and manufacturing tea. The factory and other buildings on the estate were requisitioned for defence purposes by the military authorities. Though the assessee continued in possession of the tea gardens and tended them to preserve the plants, the manufacture of tea was stopped completely. The assessee was paid compensation for the years 1944 and 1945 under the Defence of India Rules, calculated on the basis of the out-turn of tea that would have been manufactured by the assessee during that period. This court held that the amount of compensation received by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments made under the Madras Estates (Abolition and Conversion into Ryotwari) Act, 1948, to a former holder of an estate which had been abolished during the period between the taking over of the estate and the final determination and deposit of compensation under that Act. It was held to be a capital receipt and not liable to tax. Prabhu Dayal's case related to an assessee who had discovered by chance the existence of kankar in the Jind State. The assessee brought about an agreement between the State and one Shanti Prasad Jain for the acquisition of sole and exclusive monopoly rights for manufacturing cement. Shanti Prasad Jain transferred his rights under the agreement to a company of which the assessee was one of the promoters. For the services rendered by him, the company agreed to pay the assessee a commission of 1 per cent. on the yearly net profits earned by the company. The agreement was acted upon till 1950 whereafter the company did not pay the commission to the assessee. The assessee filed a suit which ended in a compromise. In terms of the compromise, the assessee was paid certain amounts as commission for the years 1951, 1952 and 1953 and a further sum of Rs. 70,000 by w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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