Law:

Section:

Section 3 of the indian income-tax act, 1922 [corresponding to section 4 of the income-tax act, 1961]-Capital receipt-Assessee-company incorporated for taking over zamindari properties pertaining to ukhara estate governed by mitakshara joint family law-Assessee took, inter alia, lease of said estate for 999 years and granted several sub-leases thereof-Portions of estate also acquired by land acquisition collector-Receipts of salami, premia and compensation taxed by ITO as revenue receipts but Tribunal excluded them as being capital receipts-Whether tribunal was justified in law for impugned exclusion-Held, yes Facts The assessee-company was incorporated on 3-7-1920 for taking over the zamindari properties pertaining to the Ukhara Estate (governed by Mitakshara joint family). By an indenture dated 5-7-1920, it took a lease of the extensive zamindari pertaining to the said estate for a term of 999 years. It also took an assignment of (a) movables, including Government promissory notes, and jewellery belonging to the members of the lessor's family ; and (b) the arrears of rents, cesses, debts and decrees, etc., due by the tenants of the said estate in respect of the properties specified in the schedule. The consideration for the said lease and assignment was fixed at Rs. 4,08,000, which it paid and satisfied by allotting and issuing its 4,080 fully paid up shares to the lessors. The quit rent receivable by the lessors for the lease was Rs. 100 per annum and the assessee also undertook to pay the revenue and cesses payable to the superior landlords in respect of the zamindari. According to clause 3 of the memorandum of association read with article 3 of the articles of association and the terms and conditions set forth in the draft agreement (forming the basis of the said indenture), the assessee was empowered "to purchase, take on lease or otherwise acquire and to traffic in land, house and other property. . . and generally to deal in or traffic by way of sub-lease, exchange or otherwise, with land and house property. ..". The estate taken on lease comprised substantial coal bearing lands and mines which the assessee started giving on sub-lease in various parcels…

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