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TMI Blog1990 (11) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... 30, 1974, was not a capital receipt ?" The question read as extracted above does not correctly convey the question arising on the facts of the case which we will set out hereinafter. The question reformulated by us should read : "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the receipt of Rs. 52,000 by the assessee during the relevant year was not a capital receipt ?" The assessee-petitioner is a registered firm carrying on the business of financing and distributing films. It had entered into an agreement on April 10, 1974, with M/s. Aparna Theatres Private Limited, a company incorporated under the Companies Act, 1956, having its registered office at Bangalore, carrying on the business of exhibiting motion pictures. Under that agreement, the assessee-firm was required to give an interest-free deposit of Rs. 5 lakhs payable in phases as set out in clause 6 of the agreement over a period of one year or more depending on when the theatre construction which had been undertaken by the company in question was completed. In consideration of such deposit being made, the assessee-firm was given the right to supply motion picture fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuously contended that, having regard to the principles laid down by the Supreme Court in number of decisions, the receipt of Rs. 52,000 was no more than compensation paid for the relinquishment of the exclusive right of the firm to have its films screened in the theatre for a period of ten years and that privilege was a capital asset and payment for that capital asset should be treated as a capital receipt and, therefore, not taxable. On the other hand, the Tribunal, relying on the decision of the Supreme Court in the case of CIT v. Rai Bahadur Jairam Valji [1959] 35 ITR 148, came to the conclusion that it was a revenue receipt. In the light of the other citations or decisions relied upon by learned counsel for the assessee-firm as well as the Revenue, it would be useful to set out certain passages from the decision in Rai Bahadur Jairam Valji's case [1959] 35 ITR 148 (SC); as well as other cases. They are as follows (headnote) : "In the determination of the question whether a receipt is capital or income, it is not possible to lay down any single test as infallible or any single criterion as decisive. The question must ultimately depend on the facts of the particular case, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Bench of the Supreme Court consisting of Subba Rao, Shah and Sikri JJ., as they were then, contended that the right to screen was similar to the right of managing agency the termination of which had come to be compensated in Kettlewell Bullen's case [1964] 53 ITR 261 (SC) and which in turn was held to be a capital receipt in accordance with the law having regard to the fact it was not a contract or agreement entered into in the course of the business of the managing agency, but entered into to terminate such agency. In fact, in that case, the Kettlewell Bullen and Co. Ltd. was having six managing agencies and the receipt which was the subject-matter of the decision was in respect of the compensation paid for the termination of one of those six agencies. It was, in that circumstance, that the Supreme Court ruled that such receipt was capital receipt, as the agency was a capital asset of the company. Mr. K. R. Prasad, learned counsel, therefore, commended to us that the same principle should be extended in deciding the question in so far as the assessee-firm was concerned, as the assessee-firm had acquired the privilege for consideration to screen the films distributed by it exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any time that it was not so. The distribution of films, normally, is based on the commission the distributor obtains from the exhibitor and the commission he receives from the producer. In some cases, a distributor may also be financing the production of that film. But the screening facility he obtains from his contract with the exhibitor is in the course of his business as distributor of films. Whether he obtains for a short duration in the normal course of distributing several films or for a long period of ten years, as in the instant case, the distributor contracted for a long duration of the exclusive use of a theatre for exhibiting his or its films it did so in the course of its business. Therefore, the first of the agreements can, undoubtedly, be only an agreement entered into in the course of its business as a distributor of films. When that agreement was superseded or cancelled by yet another agreement by which its right to seek specific performance of the terms of the first agreement was compensation he received in the nature of income acquired in the course of its business in respect of which it had entered into the earlier agreement (sic). We see from the respective dat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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