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TMI Blog1952 (1) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... d private contracts for the supply of blankets, blanketting and yarn or for any other woollen products which, in the opinion of both the parties, could be profitably handled and that, during the period of five years that the business was to run, the profits were to be shared between them in the proportion of 40 per cent. and 60 per cent. that is, the assessee firm getting 60 per cent. of the profits. It was further provided that, during the period of five years, the assessee-firm or Messrs E. Sefton and Company, Limited, were not to undertake directly or indirectly a similar business without their mutual consent obtained in writing. There were other terms in this agreement, Ex. T-A, a copy of which is included in the paper book. It is not necessary for us to set out those terms. In short, the assessee-firm and Messrs E. Sefton and Company, Limited, entered into a partnership to carry on business on certain terms and to share the profits and losses, the assessee-firm further undertaking to finance the concern on certain terms mentioned in the document. The business was carried on for a period of more than one year but on 22nd November, 1941, the parties mutually agreed to terminate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, the findings of fact have not been clearly set out. The way in which the Tribunal has expressed itself is as follows:- On the findings of fact arrived at by the Tribunal that the entire sum including ₹ 37,248 in dispute was paid to the applicant in the joint venture account by which the company was to provide materials for the manufacturing of blankets and yarn and the applicant was to provide the finances by virtue of the fact of the earlier termination in not allowing the full period of five years to run and the fact that there was an agreement by which the applicant was not at liberty to do any business, the payment received was trading receipt. It is difficult to understand what it actually means; but probably the Tribunal meant that the entire sum of ₹ 50,962 including ₹ 37,248 was received by reason of the earlier termination of the agreement which was to run for a period of five years and which included a clause to the effect that the assessee-firm was not at liberty to do any business during that period. If the whole of this amount was received as compensation for the earlier termination of the contract, the contract being directed to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision in Bush Beach's case was not really relevant. Their Lordships of the Judicial Committee had pointed out in Shaw Wallace's case that the Indian Act is not in pari materia; it is less elaborate in many ways, subject to fewer refinements, and in arrangement and language it differs greatly from the provisions with which the Courts in this country have had to deal. Under such conditions their Lordships think that little can be gained by attempting to reason from one to the other. Sri S.C. Das for the department has contended that the amount received should be treated as income from business. He has relied on the case of Short Brothers Ltd. v. Commissioners of Inland Revenue [1927] 12 Tax Cas. 955.. In that case Short Brothers Ltd., had contracted in February and March, 1920, to build two steamers for the Hindustan Steam Shipping Co., Ltd. In November of that year they agreed to the cancellation of the contracts in consideration of the payment of the sum of ? 100,000 which was paid to them on 26th November, 1920. For the assessee it was urged by Sir John Simon that it was a sum which was received by the assessee in return for which they ceased to engage in the trade or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kelsall Paisons Co. v. Commissioners of Inland Revenue [1938] 21 Tax Cas. 608 in which the assessee-firm carried onbusiness as agents on a commission basis for the sale in Scotland of the products of various manufactures and entered into agency agreements for that purpose. At the instance of the manufacturer concerned one of the agreements, which was for a period of three years, was terminated at the end of the second year in consideration of payment to the appellants of the sum of ? 1,500 as compensation. The question was whether this amount was a taxable profit or it was a capital receipt. The Lord President (Normand) said:- That was a contract incidental to the normal course of the appellants' business. Their business, indeed, was to obtain as many contracts of this kind as they could, and their profits were gained by rendering services in fulfilment of such contracts...... It was a normal incident of a business such as that of the appellants that the contracts might be modified, altered or discharged from time to time, and it was quite normal that the business carried on by the appellants should be adjustable to variations in the number and importance of the agencies ..... X X X X Extracts X X X X X X X X Extracts X X X X
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