TMI Blog2014 (7) TMI 1265X X X X Extracts X X X X X X X X Extracts X X X X ..... I.T.A. No. 1740/Kol./2012 - - - Dated:- 17-7-2014 - Shri Shamim Yahya (Accountant Member), and Shri George Mathan (Judicial Member) Shri Ravi Tulsiyan, A.R., for the assessee Shri M.L. Sundar, JCIT, Sr. D.R., for the Department O R D E R Per George Mathan: This is an appeal filed by the assessee against the order of ld. Commissioner of Income Tax (Appeals)-XXXVI, Kolkata in Appeal No. 134/CIT(A)-XXXVI/Kol/37/Cir.54/09-10 dated 24.09.2012 for the assessment year 2004-05. 2. Shri Ravi Tulsiyan, C.A., represented on behalf of the assessee and Shri M.L. Sundar, ld. JCIT Sr. D.R., represented on behalf of the Revenue. 3. In the assessee s appeal, the assessee has raised the following grounds:- (1) The order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) 3(b). Consequently, Grounds No. 3(a) 3(b) of the assessee s appeal stand dismissed being not pressed. 5. In regard to Grounds No. 2(a), 2(b) 2(c), it was submitted by the ld. A.R. that as follows in the written submissions:- 6. It was the submission that the issue being squarely covered by the decision dated 29.01.2013 of the Hon ble Delhi High Court in the case of Khanna and Annadhanam -vs.- Commissioner of Income Tax in ITA No. 1286/2008, the lump sum amount received by the assessee for foregoing his right to receive pension was liable to be treated only as capital receipt. 7. In reply, ld. Sr. D.R. submitted that the amount received by the assessee was liable to be treated as profit in lieu of salary. He vehemently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held that the compensation received for loss of an asset of enduring value would be regarded as capital. After a review of the entire case law on the subject, it was ultimately held as follows: - On an analysis of these cases which fall on two sides of the dividing line, a satisfactory measure of consistency in principle is disclosed. Where on a consideration of the circumstances, payment is made to compensate a person for cancellation of a contract which does not affect the trading structure of his business, nor deprive him of what in substance is his source of income, termination of the contract being a normal incident of the business, and such cancellation leaves him free to carry on his trade (freed from the contract terminated) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss of a source of income, it would be capital and it matters little that the assessee continues to be in receipt of income from its other similar operations. 7. We may refer to one more judgment of the Supreme Court which is reported as Oberoi Hotel Pvt. Ltd. v. CIT: (1999) 236 ITR 903. There the assessee was operating, managing and administering several hotels across the globe such as Cairo, Colombo, Kathmandu, Singapore, etc. Its agreement with Hotel Oberoi Imperial, Singapore, which it was operating from 02.11.1970 was terminated and the assessee received a sum of ₹ 29,47,500/- from the receiver of the Singapore Hotel. The Supreme Court held that the amount was received because the assessee had given up its right to purchase or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee-firm had entered into similar arrangements with other international firms of chartered accountants. The arrangement with DHS was in vogue for a fairly long period of time -13 years- and had acquired a kind of permanency as a source of income. When that source was unexpectedly terminated, it amounted to the impairment of the profit-making structure or apparatus of the assessee-firm. It is for that loss of the source of income that the compensation was calculated and paid to the assessee. The compensation was thus a substitute for the source. In our opinion, the Tribunal was wrong in treating the receipt as being revenue in nature. 8. On behalf of the revenue our attention was drawn to another judgment of the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esents a capital receipt, not assessable to income tax. The appeal of the assessee is allowed with no order as to costs . 9. In the assessee s case also, it is noticed that the ratio decided by the Hon ble Delhi High Court in the case of Khanna and Annadhanam applies in all force. In these circumstances, respectfully following the decision of the Hon ble Delhi High Court in the case of Khanna and Annadhanam referred to supra, the Assessing Officer is directed to treat the lump sum received by the assessee on giving up the right the receipt of retirement benefit as capital receipt in the hands of the assessee. 10. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 17th July, 2014. - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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