TMI Blog2018 (5) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... and not revenue as was contended by the Revenue/appellant in this case. - ITA 235/2017 and ITA 236/2017 - - - Dated:- 25-4-2018 - MR. S. RAVINDRA BHAT AND MR. VINOD GOEL JJ. Appellant Through: Mr. Sanjay Kumar and Mr. Rahul Chaudhary, Standing Counsels. Respondent Through: Mr. Inder Paul Bansal and Mr. Vivek Bansal, Advocates. MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT) 1. Revenue s appeals in these two cases question an order of the ITAT. The issue concerns the treatment of damages and compensation awarded to the assessee. The Assessment Officer (AO) rejected the assessee s claim that these were towards capital receipts and ruled that they have fallen in the revenue stream. The CIT(A) rejected the assessee s appeal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities below while deciding the issue against the assessee have not appreciated the injury caused to the profit making apparatus and that the knowhow was foundation of the business of the assessee. Appreciating the same, huge compensation was awarded by the arbitrator. The basis of award remained the lost profit due to non-supply of the knowhow and not on loss of profit and that newly installed machinery in absence of supply of knowhow have gone completely wasted. Reliance was placed on several decisions. After dealing with the issue in detail, the ITAT has decided the issue in favour of the assessee. When we examine the facts of the present case in view of the above cited decisions of Pune Bench of the ITAT, we find that in the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h could create direct relationship between the finished goods and raw material was snapped even before it reached Bombay. Payment made for loss of such goods did not bear any nexus with assessee s business. May be that if it would have reached, it could have been after conversion into strips and sheets used as raw material. But so long as it did not reach Bombay and was not converted into raw material, the connection it bore with the assessee s business was remote. And any payment made in respect of it could not be said to accrue from business. In Strong Co. of Ramsey Ltd. v. Woodifield (Surveyor of Taxes) 5 TC 215 , a converse case where the assessee claimed deduction of certain payments made to a customer, for the injury caused to him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hands of the payee. Secondly, if any payment was made for sterilization of the very source of profit-making apparatus of the assessee, or a capital asset, then that would also amount to a capital receipt in the hands of the recipient. On the other hand if forest leases were merely stock-in-trade and payments were made for taking over the stock-in-trade, then no question of capital receipt comes. The sum would represent payments of revenue nature or trading receipts. Whether in a particular case, for the contracts of the type with which we are concerned, payments were capital receipts or not would depend upon the facts and circumstances of the case. In this connection it is important to bear in mind that normally in trade there are two typ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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