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Issues Involved:
1. Whether the sum of Rs. 6,000 received by the assessee as compensation for leasing out land was a capital receipt or a revenue receipt. 2. If the above receipt is held to be a revenue receipt, whether the entire amount of Rs. 6,000 could be taxed as the income of the year of receipt or should be spread over a period of five years. Issue-Wise Detailed Analysis: 1. Capital Receipt vs. Revenue Receipt: The primary issue was to determine whether the Rs. 6,000 received by the assessee for leasing out the land was a capital receipt or a revenue receipt. The material facts indicate that the assessee, a Hindu undivided family, leased out 6 bighas 13 biswas of land for five years to Madan Lal for Rs. 6,000. The lease terms allowed the lessee to dig earth for brick-making, set up a kiln, and sell the bricks. The lessee was not permitted to cultivate or use the land for any other purpose. The income-tax authorities and the Tribunal held it as a revenue receipt, likening it to rent or royalties from mineral-bearing lands. However, the court emphasized that the nature of the transaction, not its form, determines whether it is a capital or revenue receipt. The principle is whether the transaction involves a transfer of rights (capital receipt) or merely the use of property (revenue receipt). Referring to the Supreme Court's decision in Chintamani Saran Nath Sah Deo v. Commissioner of Income-tax, the court noted that if the transaction grants a right to a portion of the capital asset, it is a capital receipt. In this case, the lease granted the lessee rights to enter, dig, mould bricks, and sell them, indicating a transfer of rights rather than mere usage. Thus, the Rs. 6,000 was considered a capital receipt. 2. Taxation Over Five Years: This issue was contingent on the first. Since the court determined the Rs. 6,000 as a capital receipt, the question of whether it should be taxed in the year of receipt or spread over five years did not arise. Comparative Analysis with Other Cases: The court compared this case with the Patna High Court decision in Janki Kuer v. Commissioner of Income-tax, where amounts received for similar leases were deemed royalties and taxable. However, the court distinguished the present case, noting that the Patna case involved periodic payments and the land's capital asset remained intact, indicating regular income exploitation. In contrast, the present case involved a lump sum for a transfer of rights, aligning it with the Supreme Court's principles. Conclusion: The court concluded that the Rs. 6,000 received by the assessee was a capital receipt, not a revenue receipt, rendering the second question moot. The reference was returned to the Income-tax Appellate Tribunal, Allahabad, with this answer, and the assessee was awarded costs of Rs. 200.
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