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TMI Blog1967 (4) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... s the stock-in-trade to one Seth Chunna mal. As the question of law, arising for decision in this case, depends upon the true interpretation of the sale deed dated March 12, 1951, it is necessary to set out the same in full. It reads : " THIS DEED OF SALE MADE THIS 12th day of March, 1951, BEWTEEN Seth Lal Chand Jain son of Seth Ramji Das, caste Jain, resident of Deputy Ganj, Delhi, hereinafter called the vendor, and Seth Sundar Lal adopted son of Seth Chhuna Mal, resident of Deputy Ganj, Delhi, hereinafter called the purchaser. WHEREAS the vendor and the purchaser under partnership with Mst. Nathia Devi widow of L. Chhunna Mal carried on trade and business for the manufacture and sale of Biris under the trade marks Pan Ka Ekka, Seth Biri No. 311 and Divi in the name and style of Seth Lal Chand Jain & Co., vide deed of partnership dated the 2nd February, 1948, and WHEREAS all the existing trade marks including the trade marks, above stated, were the property of the vendor and the purchaser and Shrimati Nathia Devi the third partner had nothing to do with them, and WHEREAS the three partners of Seth Lal Chand Jain & Co. have dissolved the partnership with their mutual consent w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its tax etc., and all securities for the same and all in all contracts and engagements benefits and advantage, which have been entered into or can be enforced by the vendor in the firm Seth Lal Chand Jain & Co., and also in the stock-in-trade good articles of the firm and in the manufactured or manufactured biris, tobacco and others in stock of Seth Lal Chand Jain & Co., and in respect to the amounted moneys standing to the credit of the vendor in the books of the firm Seth Lal Chand Jain & CO. TO HAVE AND to hold the property hereby conveyed to the purchaser exclusively and absolutely as full and complete owner of the name with all rights and privileges to enforce any contract hitherto standing in the name of the firm and to receive all amounts and outstanding hitherto due to the firm or that may hereafter be due to the firm or on account of the firm and to enter into all future contracts and carry on business as sole and absolute owner of Seth Lal Chand Jain & Co., and to represent and be the owner of all the rights and interest of the vendor in all the effects of the firm Seth Lal Chand Jain & Co. The vendor does herewith agree with the purchaser that the vendor will not at any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchaser provided that this payment shall not in any case exceed beyond the lifetime of the vendor and all taxes, etc., levied by the income-tax on this amount will be payable by the vendor himself. It is further made plain that in case the purchaser fails to make the payment of the sum of Rs. 18,500 within the time laid down hereabove. i.e., 2 years next after the date of registration of this document or if the purchaser fails to make the payment of monthly instalments of Rs. 1,500 due from the date of registration of these presents except in the event mentioned above, it shall be open to the vendor to enforce the payments of instalments due at that time through court and to realise the same from the person and the property of the purchaser and the purchaser or his heirs, executors shall have no objection to the same, provided also that in case of failure of the vendor to observe any of the covenants herein contained, he will not be, entitled to enforce the remaining payments due at the time of breach. In witness whereof the parties have set and subscribed their hands in token of the correctness of these presents witnesses : 1. Lal Chand Vendor. (Sd.) Sunder Lal Jain, 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned above, it shall be open to the vendor to enforce the payments of instalments due at that time through court and to realise the same from the person and the property of the purchaser in the purchaser or his heirs, executors shall have no objection to the same, provided also that in case of failure of the vendor to observe any of the covenants herein contained, he will not be entitled to enforce the remaining payments due at the time of the breach. " From the foregoing clauses it is clear that the purchaser agreed to pay to the vendor every month a sum of Rs. 500 during his lifetime, in consideration of the sale of his trade marks. The sale-deed, either expressly or by necessary implication, does not say that the monthly payments in question were to be made, as compensation for the restrictions imposed on the vendor. It is true that under the sale deed the purchaser was given the right to stop the payments due from him to the vendor, if the vendor committed breach of the agreement in any manner ; but, it must be noted that the agreement pemitted him not only to stop the payments, to be made every month but also that the sum of Rs. 18,500 or any part thereof, which remained unp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Union of India or Pakistan. In our opinion, the term empowering the purchaser to stop the payments in question is merely a term in terrorum. It is not necessary for us to decide in this case whether that term is valid in law. It may also be noted that the purchaser can stop those monthly payments not only in the event of the vendor engaging himself in the business of manufacture or sale of biris, but also if he commits breach of any of the other covenants in the sale deed. This circumstance runs counter to the contention of Mr. Goswamy that those monthly payments were intended as compensation for the restrictive covenants imposed on the vendor. We are in agreement with Mr. A. N. Kirpal, learned counsel for the department, that the facts of the present case fall within the rule laid down by the judicial Committee in Maharajkumar Gopal Saran Narain Singh v. Commissioner of Income-tax. In that case the assessee who owned nine annas share in an estate, with the object of discharging his debts and of obtaining for himself an adequate income for his life, conveyed the greater portion of his estate to his son-in-law's mother who owned the remaining seven annas in the estate. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sation, the assessee undertook for a period of five years to refrain from selling or accepting any agency for explosives competitive with those covered by the agency agreements terminated. The assessee claimed that the amounts received by it were capital receipts as they represented compensation for termination of the agency and consideration for the restrictive covenant. The court held that " the compensation agreed to be paid was not only in lieu of the loss of the agency but also for the respondent accepting a restrictive covenant for a specified period ; " and that " the restrictive covenant was an independent obligation, which came into operation only when the agency was terminated and that part of the compensation which was attributable to the restrictive covenant was a capital receipt and hence not taxable. " The rule laid down in that case does not govern the facts of the present case. We have earlier considered the effect of the relevant clauses in the sale deed. Next, reference was made to the decision of the Bombay High Court in Commissioner of Income-tax v. Patel Bros. Therein, the assessee, who was the promoter and managing director of a private film company, entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , no doubt, into ' income, profits and gains ', but the expansion is more a matter of words than of substance. Income, their Lordships think, in this Act connotes a periodical monetary return, ' coming in ' with some sort of regularity, or expected regularity, from definite sources. The source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return, excluding anything in the nature of a mere windfall. Thus income has been likened pictorially to the 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." From these observations it follows that the income, with which we are concerned in this case, is an income falling under section 12 of the Act. Lastly, reliance was placed on the decision of the Supreme Court in Senaiyam Doongarmall.v. Commissioner of Income-tax. Therein, the assessee, which owned a tea estate consiting of tea gardens, factories and other buildings, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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