2002 (2) TMI 339 - AT - Income Tax

Summary

Issues Involved:
1. Whether the amount received from the sale of letters is a capital receipt or revenue receipt.
2. Whether the transaction constitutes a business activity or a non-recurring, casual transaction.

Detailed Analysis:

Issue 1: Whether the amount received from the sale of letters is a capital receipt or revenue receipt.

The assessee, a distinguished author, sold letters from Mr. Graham Greene to M/s Brown University through an agent for $16,200. The assessee claimed this amount as a capital receipt, not liable to tax. The Assessing Officer (AO) rejected this claim, treating the amount as a revenue receipt, arguing that the letters were preserved for personal benefit and had monetary value. The AO considered the transaction commercial in nature due to the involvement of a professional agent.

The learned CIT(A) disagreed with the AO, stating that for a receipt to be considered revenue, it must arise from a business activity. The CIT(A) observed that the transaction was not part of a series of business transactions and that the letters had literary and sentimental value, not monetary value. The CIT(A) concluded that the transaction was a mere sale of personal effects, thus the receipt was capital in nature.

Issue 2: Whether the transaction constitutes a business activity or a non-recurring, casual transaction.

The Revenue argued that even a single transaction could be treated as a revenue transaction, citing cases like P. Krishna Menon vs. CIT, C. Rajagopalachariar vs. CIT, and K. Ramaswami Gounder vs. CIT. However, the CIT(A) and the Tribunal found these cases factually distinguishable. The CIT(A) emphasized that the assessee was not engaged in a vocation through this transaction and that the letters were preserved for their literary and sentimental value.

The Tribunal upheld the CIT(A)'s decision, noting that the Revenue failed to show that the transaction was part of a business activity. The Tribunal referenced IRC vs. Fraser, which suggested that the nature of the goods and the pride of possession could determine whether the transaction was a plunge into trade. The Tribunal concluded that the letters were not objects that needed to be sold and that the transaction did not constitute a business activity.

Conclusion:

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision that the amount received from the sale of letters was a capital receipt and not taxable as revenue. The transaction was deemed a non-recurring, casual sale of personal effects, not a business activity.