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Issues:
1. Whether salami receipts of Rs. 74,868 arising from business are exempt under section 10(3) of the Income-tax Act, 1961? Detailed Analysis: 1. The appeal in question was regarding the treatment of salami receipts of Rs. 74,868 as assessable revenue receipts under the Income-tax Act, 1961. The assessee had taken on lease the second floor of a building and received deposits mentioned as salami from tenants. The Income Tax Officer (ITO) included this amount in the assessee's total income as business income, citing the decision in the case of Karanpura Development Co. Ltd. v. CIT [1962] 44 ITR 362 (SC). The Appellate Assistant Commissioner (AAC) held that the salami amount was exempt under section 10(3) as it represented casual income arising from business activities. The AAC distinguished the Karanpura case and ruled in favor of the assessee. 2. The Revenue challenged the AAC's decision, arguing that the provisions of section 10(3) did not apply in this case. The departmental representative contended that the salami amount should be treated as trading receipts based on precedents like Karanpura Development Co. Ltd. and Ukhara Estate Zamindaries (P.) Ltd. The representative emphasized that the assessee's business activity involved leasing properties, making the salami receipts taxable as business income. However, the assessee's counsel argued that the salami amount was capital in nature, citing various legal precedents supporting this position. 3. Upon considering the arguments, the Tribunal examined the nature of the salami receipts and the specific circumstances of the case. It noted that the amount was received from prospective tenants before the tenancy was created, indicating a capital nature of the receipt. The Tribunal referred to the case of Port Canning & Land Improvement Co. Ltd. and Ukhara Estate Zamindaries (P.) Ltd., where similar receipts were treated as capital in nature. The Tribunal further clarified the legal position that the lessee, in this case, was the owner of the superstructure during the lease period, supporting the capital nature of the salami receipts. 4. Ultimately, the Tribunal held that the disputed amount was a receipt of salami and not a trading or revenue receipt. It concluded that the salami receipts were exempt from taxation, aligning with the AAC's decision. The Tribunal dismissed the departmental appeal, affirming that the salami amount was capital in nature and not subject to income tax. The Tribunal found it unnecessary to delve into the application of section 10(3) or consider the other legal precedents cited by both parties, as the capital nature of the salami receipts was determinative in this case.
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