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Issues Involved:
1. Whether there was any material on record for the President to find that the assessee's contention of intending to buy the mills was without basis. 2. Whether the receipt in question was a revenue receipt from a venture in the nature of trade and rightly brought to tax. Detailed Analysis: Issue 1: Material on Record for President's Finding The first question examines if there was any material on record to support the President's finding that the assessee had no intention to buy the mills. The President found ample materials to support this conclusion: - The mills were valued at about four crores and three lakhs of rupees, and the assessee did not have the financial capacity to buy them. - The remand report indicated the appellant firm was short of capital at the time. - The assessee was associated with Mr. Mitchell and Mr. Hodge, indicating a lack of independent financial capacity. - The subsequent purchase of the mills by Bagla Jaipuria Co. further supported the lack of intent by the assessee. - No documentary evidence or testimony from the senior partner, Ram Kumar Agarwalla, was produced to show an intention to buy the mills. The court concluded that these facts and circumstances provided enough material to support the President's finding. Additionally, the court noted that the question of intent to buy the mills was not material to the main issue at hand, which was the nature of the receipt. Issue 2: Nature of the Receipt as Revenue Receipt The second question, which is the main issue, concerns whether the receipt was a revenue receipt from a venture in the nature of trade and liable to tax. The court agreed with the President's finding that it was indeed a revenue receipt, based on several reasons: - The assessee's accounts showed the sum of Rs. 2,00,000 under "brokerage and commission" and paid Rs. 25,000 to Ratanlal Goel for services rendered, indicating it was treated as income. - The assessee filed a revised return excluding this income without any explanation for the initial inclusion, suggesting it was an afterthought. - The payment to Goel indicated the money was revenue, as no businessman would pay remuneration from a capital amount. - The partnership deed showed the assessee was a finance broker, and the transaction was consistent with brokerage activities. - The assessee and his associates accepted the offer from the Jaipurias and received the money in the course of their joint venture, indicating a business transaction. The court rejected the argument that the payment was for a restrictive or negative covenant, stating there was no such covenant in this case. The payment was for not competing in the purchase of the mills, which was part of the business transaction. The court cited relevant case law, including: - In re Susil C. Sen, where a payment received for services rendered in a business context was held to be taxable income. - Vaughan v. Archie Parnell & Alfred Zeitlin Ltd., where damages for breach of contract were included in taxable profits. - Shadbolt v. Salmon Estate Ltd., where a payment received in place of a trading asset was considered a trading receipt. - Thompson v. Magnesium Elektron Ltd., where payments received as part of a business arrangement were deemed trade receipts. The court concluded that the receipt was from an adventure in the nature of trade and was rightly brought to tax. The argument that the entire Rs. 6,00,000 should have been taxed was dismissed as fallacious, as the assessee only received Rs. 2,00,000, and this point was not raised at any prior stage. Conclusion: The court answered the second question in the affirmative, holding that the receipt was a revenue receipt from an adventure in the nature of trade and was rightly brought to tax. The assessee was ordered to pay the costs of the reference, certified for two counsel.
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