Law:

Section:

JUDGMENT Kotwal, CJ.-The question referred for our decision is as follows: "Whether, on the facts and circumstances of the case, the sum of Rs. 1,05,074 received by the applicant as compensation from the Government is taxable as income of the applicant or is a capital receipt in its hands?" The question arises with reference to the assessment year 1951-52, the account year being the Samvat year 2006, i.e., from October 22, 1949, to November 9, 1950. The facts, upon which the reference came to be made, are briefly as follows : The assessee is an unregistered firm by the name of Manna Ramji & Co. In the year 1944 they were doing business at Poona as timber merchants. For the purpose of their business they had six sheds in which they used to stock their timber and an office premises. It appears that the proprietor had a residential house in Poona. On May 19, 1944, during the last war, the Collector of Poona requisitioned the above premises for the purpose of godowns for storage of food grains. Originally, the entire premises of the assessee were requisitioned but upon request from the firm, the Collector agreed to allow the office premises to remain in their possession as before. Consequent upon the requisition, the assessee put in a claim for compensation under section 19 of the Defence of India Act, claiming Rs. 1,85,200 some time in October, 1944. The Collector on his part, however, offered them only rent at the rate of Rs. 310 per month some time in June, 1946. Not satisfied with this offer the assessee-applicant claimed reference to arbitration and on November 10, 1947, the Civil Judge, Senior Division, Poona, was appointed the arbitrator. The Government appointed its consulting surveyor as an assessor to aid the arbitrator and the assessee on its part appointed one Mr. J.P. Parekh as its assessor. On April 15, 1948, the arbitrator gave his award and he awarded the following sums of money as compensation to the assessee : (1)Rs. 310 per month as rent from the 15th May, 1944, till the date on which the premises would be restored to the claimants. (2)A lump sum of Rs. 1,25,500 for loss of earnings. (3)A sum of Rs. 100 for loss of certain wooden frames…

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