Law: Income Tax Act, 1922

Section: 34(3)(vii)

Income tax Act (XI of 1922)-----Ss. 34 (3) (vii) Income or capital Compulsory acquisition of building Compensation for compulsory vacation of premises, disturbance and loss of business ¬Whether capital receipt Whether casual or non recurring receipt¬[Commissioner of Income tax v. Shamsher Printing Press (1953) 23 I T R 363 reversed.] The respondent firm had for the purpose of its business a printing press. The premises in which the press was housed was requisitioned by the Government, and the respondent had to shift its business to another place. Of the various sums paid as com¬pensation for the requisition, Government paid Rs. 57,435 towards the claim of the respondent "on account of the compulsory vacation of the premises, disturbance and loss of business." The question was whether the sum of Rs. 57,435 was a revenue receipt and liable to tax: Held, that the sum of Rs. 57,435 was not received by the respondent for any injury to its capital assets including goodwill : it was received as compensation for loss of profits and was a revenue receipt liable to tax. Further, as it was a trad¬ing receipt it was not exempt from tax under section 4 (3) (vii) of the Income tax Act as a casual and non recurrent receipt. Commissioner of Income tax v. Shamsher Printing Press (1953) 23 I T R 363 reversed. Hill v. Fearis (1905) 1 Ch. 466 and Van den Berghs Ltd. v. Clark (1935) A C 431 ref. JUDGMENT SARKAR, J. ----The question raised is whether a certain sum received by the respondent was a capital receipt or a revenue receipt. The respondent was a firm carrying on a business of purchasing and selling paper, stationery and other things and manufacturing books, exercise books, diaries etc. and for the purpose of its business it had a printing press. The business was carried on and the press housed in a building belonging to its partners where the latter also resided. This building was requisitioned by the Government in September, 1943, for the duration of the war. The respondent had thereupon to shift its business to another place where it was restarted sometime later. The respondent claimed compensation for the requisition on various accounts arid was paid various sums. One of…

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