Law:

Section:

SECTION 4 OF THE INCOME-TAX ACT, 1961 - CAPITAL OR REVENUE RECEIPT - ASSESSEE-FIRM, CARRYING ON BUSINESS IN EXHIBITION OF CINEMA FILMS, GAVE ITS CINEMA HALL ON LEASE FOR A LIMITED PERIOD BY AN AGREEMENT DATED 25-8-1968 AND AN AMOUNT OF RS. 40,000 WAS DEPOSITED WITH ASSESSEE AS SECURITY BY LESSEE WITH A CONDITION THAT IN CASE OF DEFAULT IN PAYMENT OF WEEKLY LEASE AMOUNT, AGREEMENT OF LEASE WOULD BE CANCELLED AND SECURITY DEPOSIT WOULD BE FORFEITED - AFTER SOME TIME AS LESSEE DID COMMIT DEFAULT IN PAYMENT OF WEEKLY LEASE AMOUNT, ASSESSEE CANCELLED AGREEMENT AND FORFEITED IMPUGNED AMOUNT OF SECURITY DEPOSIT - SUBSEQUENT TO TERMINATION OF SAID LEASE, ASSESSEE LEASED ITS CINEMA HALL TO ANOTHER FIRM - WHETHER AFORESAID LEASE AGREEMENT DATED 25-8-1968 CONSTITUTED SOURCE OR PROFIT-MAKING APPARATUS OF ASSESSEE SO THAT CANCELLATION OF SAID AGREEMENT IMPAIRED TRADING STRUCTURES OF ASSESSEE - HELD, ON FACTS, NO - WHETHER IN VIEW OF FACT THAT CANCELLATION OF SAID AGREEMENT DID NOT RESULT IN DISCONTINUANCE OF ASSESSEE'S BUSINESS AND PROFIT-MAKING MACHINERY OF ASSESSEE CONTINUED THEREAFTER AND THAT TERMINATION OF IT WAS A NORMAL INCIDENT OF ASSESSEE'S BUSINESS, IMPUGNED AMOUNT OF SECURITY DEPOSIT FORFEITED BY ASSESSEE WAS A REVENUE RECEIPT - HELD, ON FACTS, YES Facts The assessee-firm was carrying on business in the exhibition of cinema films. By an agreement dated 25-8-1968, the assessee leased the cinema hall for a period of 151 weeks subject to the payment of weekly rent. A sum of Rs. 40,000 was also deposited by the lessee with the assessee as a security. According to the terms of the agreement the amount of Rs. 40,000 was to be returned to the lessee one week before the date of termination of the agreement, it was also provided in the agreement that if the lessee failed to pay the weekly hire, as agreed, for any week, the agreement would stand cancelled and the impugned amount of security deposit would be forfeited. After sometime, the lessee did commit a default in payment of the weekly lease amount for three weeks continuously. Thereupon, the assessee served a notice on the lessee whereby it cancelled the said agreement and forfeited the impugned amount of security…

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