TMI Blog1978 (11) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... real brothers. The assessee-firm carried on business with its head office at Amritsar. There was another firm under the name and style of M/s. Tulsi Ram Kanhaya Lal carrying on business with its head office at Ahmedabad. This firm will hereinafter be referred to as the " Ahmedabad firm ". The partners of the Ahmedabad firm were, (1) L. Lachhman Dass Nayar, (2) L. Chuni Lal Nayar and (3) L. Ralia Ram Khanna. Thus, it emerges that L. Lachhman Dass and L. Chuni Lal Nayar were partners in both the firms. In the year 1947, a permit was issued for supply of 250 bales of grey cotton cloth in favour of the Textile Commissioner, Jammu. The assessee-firm had undertaken to supply this cloth to the Textile Commissioner, Jammu, and for this Purpose it placed an order with the Ahmedabad firm for the supply of 176 bales of cloth to be consigned by rail to the Textile Commissioner at Jammu Tawi Railway Station. The Ahmedabad firm Complied with all the formalities of the order and consigned the required goods to " sell " and sent the railway receipt along with the invoice to the assessee-firm at Amritsar. The assessee-firm in its turn re-endorsed the railway receipt in favour of the Textile Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt and that it should have been allowed as a deduction while computing the income of the previous year. While concurring with the view taken by the Accountant Member, the President in his order dated September 25, 1953, observed as under : " I have no doubt in my mind that the assessee lost his stock-in-trade in the year of account. Merely because he may have a claim with the Government of India, it cannot be said that the loss was not ascertained or was not definite. In fact, I find that in the written statement filed on behalf of the Government, the Government's liability was not accepted. It was only when there was a compromise that the Government accepted liability to pay the compensation." Thus, the assessee-firm's appeal stood partly allowed and the ITO was directed to exclude the sum of Rs. 1,74,827 from the total income. The revenue filed an application for reference under s. 66(1) of the Indian I.T. Act, 1922, but the same was dismissed by the Tribunal. The revenue then moved the High Court under s. 66(2) and the Tribunal was directed to refer the following question of law to the High Court : " Whether, on the facts and circumstances of the case, any, and if so wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersons " as the application for renewal of registration was refused. Copies of, (i) letter of Mr. D. V. Puri, (ii) assessment order, and (iii) order refusing renewal of registration are attached with the statement of the case as annexs. " B"," C " and " D", respectively. Two appeals were preferred by the assessee-firm before the AAC, who, vide his order dated November 13, 1958, accepted the claim of the assessee-firm for registration. He, however, confirmed the assessment made by the ITO. Copies of both the orders of the AAC are attached with the statement of the case as annexs. " E " and " F ". Both the revenue and the assessee filed appeals before the Tribunal. The stand taken by the revenue before the Tribunal was that because of the dissolution of the assessee-firm on March 18, 1950, no firm existed during the previous year relevant to the assessment year 1952-53, and the AAC erred in granting renewal of registration to the assessee-firm. The stand taken by the assessee-firm was that the firm continued its business activity and, therefore, it required registration. The contention of the revenue was accepted by the Tribunal and the appeal allowed, vide its order dated August ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard by Mr. Awasthy, learned counsel for the revenue, is that the assessee-firm having accepted the order of the Tribunal (annex. " H ") it accepted the fact that the receipt of Rs. 1,24,586 was the income of the unregistered firm and not the individual income of the partners. For this, he placed reliance on the Tribunal's finding in para. 9 of its judgment dated July 17, 1972 (annex. " K "), in which it is categorically observed that the Tribunal's order dated September 14, 1960, whereby the assessment made in the status of an " association of persons " was annulled and the ITO was directed to make a fresh assessment according to law in the status of " firm ", has not been challenged in a reference by the assessee and has, therefore, become final. The main contention of Mr. Awasthy is that since this finding was not challenged by the assessee-firm, now it is not open to the Tribunal to say that the assessee-firm did not continue with any business. On the other hand, Mr. Bhagirath Dass, learned counsel for the assessee-firm, contends that the aforesaid disputed amount could not be taxed under s. 10(2A) of the Indian I.T. Act, 1922, because the assessment pertained to the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under: " We have carefully considered the rival contentions. The Tribunal's order in I.T.A. No. 10192 of 1958-59, dated 14th September, 1960, whereby the assessment made in the status of an ' association of persons ' was annulled and the Income-tax Officer was directed to make a fresh assessment according to law in the status of the firm, has not been challenged in a reference by the assessee and has, therefore, become final. The Tribunal had categorically stated that the status should be adopted as that of firm and it is, therefore, not open to the assessee to challenge now that there was no firm in existence in this year. 'the fact that this firm is not entitled to registration for this year has also become final because after the assessee's reference in R.A. No. 863 of 1960-61 (arising out of I.T.A. No. 10207 of 1958-59) was dismissed on March 8, 1961, the assessee did not carry the matter further to the High Court. The status has, therefore, been correctly determined as that of an unregistered firm in this year." Once this status is accepted by the assessee-firm, then there is no difficulty in holding that the amount of Rs. 1,14,486 is the income of the assessee-firm in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o consist of a single act or a series of acts spread over a period ....... Generally, payments made in settlement of rights under a trading contract are trading receipts and are assessable to revenue. But where person who is carrying on business is prevented from doing so by external authority in exercise of a paramount power and is awarded compensation therefor, whether the receipt is a capital receipt or a revenue receipt will depend upon whether it is compensation for injury inflicted on a capital asset or on a stock-in-trade. " In CIT v. Siewart and Dholakia Private Ltd. [1974] 95 ITR 573 (Cal), it was held by their Lordships of the Calcutta High Court that the true character of the money received by the assessee on the basis of the consent decree in a suit represented compensation for loss to the assessee in its trade and the said amount must, therefore, be considered to be a trading receipt of the assessee. The fallacy in the judgment of the Tribunal is obvious. In para. 9, it held that the assessee was an unregistered firm, whereas in para. 11 it stated that the assessee-firm stood dissolved. This is not the correct approach to decide the matter in dispute. In CIT v. P. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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