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TMI Blog1972 (10) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... es of this case, the sum of Rs. 82,460 is liable to be taxed in the hands of the assessee ? " The question relates to the assessment year 1948-49, the relevant previous year being the calendar year ending 31st December, 1947. The facts which require to be noticed are as follows : Under an agreement of lease dated 21st July, 1942, the assessee agreed to become a tenant of certain premises situated at plots Nos. 7 and 12, Marine Drive, for using the premises as a boarding and lodging hotel. The lease was to commence from the date the building was ready and completely constructed and possession was delivered to the assessee. The assessee was to provide crockery, cutlery, silverware, glassware, napkins and such other things for running the business of the hotel. The lease was to be for a period of five years from the date of delivery of possession of the building for running the hotel. By a requisition order dated 25th April, 1942, the Government of India requisitioned and directed delivery of possession of the property to the army authorities. The requisition was to continue for the period of the war and six months thereafter. The assessee, thereupon, made certain representation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ril, 1947, there were negotiations between the parties in connection with the claim of the assessee for payment of larger compensation and this claim was ultimately settled at Rs. 1,15,610. The assessee by his letter dated 20th January, 1948, stated that he was willing to accept the above sum in full and final settlement of his claim for loss of profit which he had made against the Government of India in respect of requisition of the premises by the army authorities during the war and thereafter. The assessee was paid the respective sums of Rs. 25,000, Rs. 25,000 and Rs. 65,610 respectively on September 1, 1947, November 25, 1947, and March 4, 1948. The particulars of the claim settled as above shows that out of the above sum of Rs. 1,15,610, Rs. 33,150 were paid in respect of the rent that the assessee had to pay to the landlords. The question raised in the present reference accordingly relates to the balance of Rs. 82,460 paid in the above manner by the army authorities to the assessee. In connection with the sum of Rs. 40,000 which had already been paid to the assessee on 6th May, 1946, on behalf of the revenue, it was contended that it was trading receipt and liable to tax. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akhs which was revived by the assessee ...... It was not compensation for loss of profits of any business taken over by the authorities, under any requisitioning order from the assessee." These findings are now challenged before us by Mr. Joshi for the revenue by relying upon the observations of the Supreme Court in the case of Commissioner of Income-tax v. Shamsher Printing Press, and Commissioner of Income-tax v. Manna Ramji and Co. The submission made by Mr. Joshi for the revenue was that the above sum of Rs. 82,460 had not been received by the assessee as compensation in respect of any injury to his capital asset. The above sum was received by him as compensation for loss of profits which had accrued by reason of the requisition orders. These orders were a temporary interruption to the assessee carrying on the business. By these orders the capital assets of the assessee had not been permanently sterilised. By the requisiton orders the assessee was not permanently deprived of any source of income. The amount was paid as compensation for temporary interruption of his business activities and was accordingly profits and/or revenue receipts. Now, these submissions are not justif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee who owned a tea estate consisting of tea gardens, factories and other buildings and had been carrying on business of growing and manufacturing tea. The factories and other buildings on the estate were requisitioned for defence purposes by the military authorties. Though the assessee had continued to be in possession of the tea gardens and tended them to preserve the plants, the manufacture of tea was stopped completely. The assessee was paid compensation for the years 1944 and 1945 under the Defence of India Rules calculated on the basis of the outturn of tea that would have been manufactured by the assessee during that period. On the contention of the revenue that these payments were revenue receipts the Supreme Court examined several decisions of different courts. The court noticed that in the case of Commissioner of Income-tax v. Shaw Wallace Co., their Lordships of the Privy Council had observed that, "income meant a periodical monetary return coming in with some sort of regularity or expected regularity from a definite source and in business was the produce of something loosely spoken of as capital. In business, income is profit earned by a process of production, or, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hamsher Printing Press, now relied upon by Mr. Joshi, the observation of the court was : " Though the payment in question was not made to fill a hole in the capital of the assessee, as in the Glenboig case, nor was it made to fill a hole in the profits of a going business as in the Shamsher Printing Press case, it cannot be treated as partaking the character of profits because business not having been done, no question of profits taxable under section 10 arose. The Privy Council described such a payment as a solatium. It is not necessary to give it a name; it is sufficient to say that it was not profit of a business. " We are unable to accept Mr. Joshi's submission that the facts of the case in Senairam Doongarmall v. Commissioner of Income-tax, and the observations made in that case by the Supreme Court can be distinguished in their application to the facts the present case. Each and all observations of the Supreme Court in the case of Senairam Doongarmall are wholly applicable to the facts of the present case. The sum of Rs. 82,460 could in no event be treated as partaking the character of profits, because business never existed and the question of profits taxable under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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