Law:

Section:

Section 4 of the Income-tax Act, 1961 [Corresponding to section 3 of the Indian Income-tax Act, 1922] - Income - Chargeable as - Assessment year 1942-43 - Under an agreement entered into between assessee and a company, assessee was to work a quarry for a period of 25 years and to supply limestone quarried therefrom to company according to its requirement - As railway authorities did not agree to construction of a siding and loopline to quarry, agreement could not be carried on and had to be terminated by reaching another agreement - Pursuant to that agreement, assessee was paid a sum of Rs. 2,50,000 as solatium besides other amounts remaining unpaid - Whether there was, at no time any agreement which operated as a bar to carrying on of business by assessee and, therefore, receipt of Rs. 2,50,000 by assessee was a revenue receipt and was chargeable to tax - Held, yes FACTS The respondent-assessee was carrying on various business activities. Earlier, under an agreement entered into on 5-1-1935 and modified on 21-12-1935, the assessee was working a limestone quarry at Paraghat and was selling limestone to a company as per agreement. But later on, finding that the rates were uneconomic owning to increase in the railway freight, it decided to make purchases from other sources, and informed the respondent accordingly. Thereupon, the respondent took up the matter to Court. Thereafter another agreement was entered into on 9-5-1940 in settlement of all the disputes. Under this agreement, the respondent was to work a quarry of the company at Gangapur for a period of 25 years and to supply the limestone quarried therefrom to the company. This quarry was situated near Kulti where the company carried on its smelting operations, and obviously it would reduce the working expenses, if limestone required therefor could be got from Gangapur. As there were no facilities in Gangapur railway station for transporting the goods from the quarry, it was arranged that permission to construct a siding at Gangapur should be obtained and that the cost thereof should be borne by the company. Until the siding could be completed, the respondent was to be paid Rs. 4,000 every month.…

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