9911796707
TMI Blog1965 (4) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... 11, 1944. With a view to continue the arrangement, a fresh agreement was executed on June 12, 1944. The preamble of the agreement was : " Whereas the signatories generally as a consequence of over-production having been put to considerable losses and in general interests of the members and their employees and of the association and the jute industry and trade in general, etc ..... have determined that provision similar to those contained in the Working Time Agreement should be entered into and continued in manner hereinafter appearing. " By clause 4 of the agreement, the association imposed restrictions upon the hours of work of its members. The number of hours for which the members were entitled to work their factories were called "loo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he association the respondent sold 220 x 24 "loom-hours" to the Naskarpara Jute Mills and as consideration of the sale received Rs. 53,460. In the account year corresponding to the assessment year 1950-51 the respondent received from the Birla Jute Mills and Hanuman Jute Mills a total amount of Rs. 1,85,230 for sale of surplus loom-hours. In proceedings for assessment for the assessment years 1949-50 and 1950-51 the Income-tax Officer included in the total income of the respondent the amount received by sale of "loom-hours" as revenue receipts liable to tax. The order of the Income-tax Officer was confirmed by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. At the instance of the respondent, the Tribunal referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent. It is also common ground that for imposing restrictions upon the number of working hours, no compensation was paid to the members by the association or by any other body; if it were, such compensation being paid for agreeing to restraint on trade would be capital. To protect the interests of its members the association provided that the members shall work their looms for a fixed number of hours and gave to its members facility of transferring the number of "loom-hours". But by transferring "loom-bours" no interest in the looms or the machinery of the factory was being transferred; thereby merely a member of the association was permitted in addition to the "loom-hours" allotted to that member to work its factory for such "loom-bou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and chargeable to income-tax. In support of his contention counsel relied upon the judgment of this court in Commissioner of Excess Profits Tax v. Shri Lakshmi Mills Ltd. In Shri Lakshmi Silk Mills Ltd. case the assessee-company was a manufacturing concern and had for the purpose of its business installed a plant for dyeing silk yarn. For a part of the chargeable period the company could not secure silk yarn and its plant remained idle. The company then let out the plant and the question arose whether rent received by the company was chargeable to excess profits tax as profit of the business or was income from other sources and, therefore, not chargeable to excess profits tax. It was held by this court that if a commercial asset is incapabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature be let out while retaining property in them, for there can be no grant of a temporary right to use "loom-hours". "Loom-hours" are the asset of the respondent, but temporary user of the "loom-hours" cannot be granted. The transaction in this case is of sale of "loom-hours". There is no doubt that when a businessman disposes of his capital for whatever reason, unless it is a part of his circulating capital, the receipt is capital and not income which is taxable. Distinction between revenue and capital in the law of income-tax is fundamental. Tax is ordinarily not levied on capital profits : it is levied on income. It is well-settled that sale of stock-in-trade or circulating capital or rendering service in the course of trading resu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the manner in which that asset was exploited by the owner of the business. In the view of the High Court the respondent was entitled to exploit the asset to its best advantage : it may do so either by utilising it personally or by letting it out to somebody else, and the sale of a part of its quota of "loom-hours" amounted to exploitation of its capital asset and the receipt obtained therefrom was income. We are unable to agree with this view. The surplus " loom-hours " were disposed of and no interest remained therein with the respondent: there was no exploitation of the "loom-hours" by permitting user while retaining ownership. Receipt by sale of "loom-hours" must therefore be regarded in this case as a capital receipt and not income. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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