1993 (2) TMI 89 - HC - Income Tax

Summary

Issues involved: The judgment pertains to the assessment years 1957-58 to 1960-61 and addresses two main questions: 1. Whether an appeal to the Appellate Assistant Commissioner against the charge of penal interest was competent? 2. Whether the sum of Rs. 1 lakh was rightly assessed as the income of the company?

Question 1: The court, based on the decision of the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961, concluded that an appeal against the charge of penal interest was not competent, ruling in favor of the Revenue.

Question 2: The case involved the transfer of a contract by the assessee-company to a new company for a sum of Rs. 1,00,000. The assessee claimed this amount to be exempt from income tax as a capital receipt. However, the income-tax authorities deemed it taxable as a revenue receipt. The court analyzed various precedents, including CIT v. Maheshwari Devi Jute Mills Ltd. [1965] 57 ITR 36 and CIT v. Barium Chemicals Ltd. [1987] 168 ITR 164, but found them not applicable to the current case. The court determined that the amount received was in the nature of a revenue receipt rather than a capital receipt, citing the case of Kettlewell Bullen and Co. Ltd. v. CIT [1964] 53 ITR 261 as a reference. The court emphasized that the payment received for the assignment of the contract did not affect the trading structure of the company and was part of its normal business activities, thus classifying it as a revenue receipt. Drawing parallels with the case of CIT v. Gangadhar Baijnath [1972] 86 ITR 19, the court held that the amount received for the assignment of the contract constituted a business receipt. Consequently, the court answered question No. 2 in the affirmative and in favor of the Revenue.

Conclusion: The judgment resolved the issues by ruling against the assessee on both questions, affirming the taxability of the sum of Rs. 1,00,000 as a revenue receipt.