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Issues:
1. Assessment of a receipt of Rs. 25,500 by the assessee as income for the assessment year 1968-69. 2. Determination of the nature of the receipt - whether it is a revenue receipt or a capital receipt. Detailed Analysis: 1. The assessee, a registered firm engaged in the manufacture and sale of fertilizers under the trade name "Premier Fertilisers," sought an injunction against another company, "Premier Fertilizers Ltd.," for using a similar name. The lower courts ruled in favor of the assessee, granting the injunction. A compromise was later reached, where the other company agreed to pay Rs. 25,500 to the assessee. The issue arose when the Income Tax Officer (ITO) treated this receipt as income for the assessment year 1968-69, considering it a compensation for loss of profit. The Appellate Tribunal (ITAT) initially accepted the assessee's argument that the receipt was capital in nature as it was related to permitting the limited company to use its trade name. 2. The Commissioner of Income Tax (CIT) referred the matter to the High Court, questioning the Tribunal's decision. The High Court observed that the Tribunal had not addressed all aspects, such as how the amount was determined and the purpose of the settlement. The Tribunal was directed to reconsider the case comprehensively. Upon rehearing, the assessee contended that the receipt was solely for sharing the use of its trade name and did not represent a loss of income. The department argued that the amount compensated for income loss due to competition, justifying its classification as a revenue receipt. 3. The Tribunal reviewed the facts and arguments presented by both parties. It noted that the dispute centered on the use of the trade name "Premier Fertilizers" by the other company, violating the assessee's rights. The compromise resulted in a monetary compensation replacing the injunction. While the exact computation method for Rs. 25,500 was unclear, the Tribunal concluded that the compensation aimed to address the erosion of the assessee's business caused by the competitor's use of its name. As the right to a name is a capital asset linked to goodwill, the compensation was deemed a capital receipt, not taxable as income for the assessment year. 4. The Tribunal emphasized that the compensation was for the long-term loss suffered by the assessee's goodwill due to the competitor's actions, starting from 1960. Given the capital nature of goodwill and the absence of income element in the receipt, it was held that the compensation did not constitute revenue. The Tribunal reiterated its previous decision, upholding that the receipt of Rs. 25,500 was a capital receipt and not taxable as income for the assessment year 1968-69. 5. Consequently, the Tribunal affirmed its earlier order without modification, maintaining that the compensation received by the assessee was a capital receipt and not subject to taxation as income for the relevant assessment year.
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