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TMI Blog1972 (8) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... nd style of Manna Ramji Co. in Bhavani Peth, Poona City. The business premises consisted of an office and six sheds used for storing wood and timber of all kinds. The respondent-firm constructed the six sheds for the purpose of its business after taking the site thereof on a long lease. On May 19, 1944, the Collector of Poona requisitioned the premises of the respondent under the Defence of India Act as from May 19, 1944, for the purpose of using them as store houses for foodgrains. Initially the requisition order covered the six sheds as well as the office of the respondent, but at the request of the respondent-firm the Collector agreed to allow it to remain in possession of the office premises. In October, 1944, the respondent made a claim for Rs. 1,85,200 on account of compensation for the requisitioned premises. In June, 1946, the Collector offered to pay compensation at the rate of Rs. 310 per month. The respondent feeling dissatisfied with the offer of the Collector, moved the Government for a reference to arbitration under the provisions of the Defence of India Act. The Civil Judge, Senior Division, Poona, was thereafter appointed arbitrator on November 10, 1947. The Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 500 was a revenue receipt as it had been received on account of the loss of earnings of the timber business. The respondent was, however, allowed to set off the losses of Rs. 4,572 and Rs. 498, which had been brought forward from the assessment years 1949-50 and 1950-51, against the sum of Rs. 1,05,074. On being moved by the respondent, the Tribunal referred the following question to the High Court: " Whether, on the facts and in the circumstances of the case, the sum of Rs. 1,05,074 received by the applicant as compensation from the Government is taxable as income of the applicant or is a capital receipt in its hands?" The High Court held that the amount received by the respondent for the requisitioning of the six sheds or godowns was in the nature of capital receipt in the hands of the respondent-firm for the damage sustained in the profit-making apparatus. It was, in the opinion of the High Court, not a revenue receipt and, as such, not taxable. In appeal Mr. Ahuja on behalf of the appellant has assailed the judgment of the High Court and has urged that the sum of Rs. 1,05,074 received by the respondent was a revenue receipt and not a capital receipt as the amount repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect was as under: " As already pointed out, the office premises remained with the assessee-firm and the business of disposing of the stock-in-trade continued to be directed from that place. Thus this was not a case of a business coming to a standstill altogether but it is a case of carrying on the same business on a smaller scale. Even this business was carried on by the assessee-firm in its usual name and style from the same office premises from which it used to carry it on prior to the requisition of the godowns by the Government...... If any injury was caused to the assessee's business, including the capital assets it held for the purpose of carrying on that business, it was to the volume of the business and not to the profit-making apparatus itself." In the light of the above findings of fact, we have no doubt that the amount received by the respondent for the loss of earnings was revenue receipt. It can hardly be disputed that if the respondent-firm had been earning profits as a result of its business during the years the premises in question remained under requisition, the said profit would have been treated as revenue receipt and liable to be taxed as such. The amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved by Lord Buckmaster in the case of Glenboig Union Fireclay Co. Ltd. v. Commissioners of Inland Revenue "there is no relation between the measure that is used for the purpose of calculating a particular result and the quality of the figure that is arrived at by means of the application of that test." The above observation was quoted with approval by this court in the case of Senairam Doongarmall v. Commissioner of Income-tax and it was held that it is the quality of payment that is decisive of the character of the payment and not the method of the payment or its measure as makes it fall within capital or revenue. Reliance has been placed by Mr. Hajarnavis on the ratio of the decision of this court in the case of Senairam Doongarmall. The assessee-family in that case owned a tea estate consisting of tea gardens, factories and other buildings and carried on the business of growing and manufacturing tea. The factory and other buildings on the estate were requisitioned for defence purposes by the military authorities. Though the assessee continued in possession of the tea gardens and tended them to preserve the plants, the manufacture of tea was stopped completely. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot afford much assistance in the present case. Reference has also been made by Mr. Hajarnavis to the cases of S. R. Y. Sivaram Prasad Bahadur v. Commissioner of Income-tax and Commissioner of Income-tax v. Prabhu Dayal. Sivaram Prasad Bahadur's case related to interim payments made under the Madras Estates (Abolition and Conversion into Ryotwari) Act, 1948, to a former holder of an estate which had been abolished during the period between the taking over of the estate and the final determination and deposit of compensation under that Act. It was held to be a capital receipt and not liable to tax. Prabhu Dayal's case related to an assessee who had discovered by chance the existence of kankar in the Jind State. The assessee brought about an agreement between the State and one Shanti Prasad Jain for the acquisition of sole and exclusive monopoly rights for manufacturing cement. Shanti Prasad Jain transferred his rights under the agreement to a company of which the assessee was one of the promoters. For the services rendered by him, the company agreed to pay the assessee a commission of 1 per cent. on the yearly net profits earned by the company. The agreement was acted upon till 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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