Law:

Section:

Section 4 of the Indian Income-tax Act, 1961 - Income - Capital or revenue receipt - Assessee-company and another company were jointly entitled to obtain a mica lease - Assessee agreed to grant of lease solely in favour of other company in lieu of a consideration in addition to sum receivable as share under award of arbitration and sum equivalent to 50 per cent of net profits earned by other company during currency of lease - Assessee went into voluntary liquidation - Liquidator of company assigned its rights to receive said royalty and other benefits to another company for a lump sum consideration - Whether in appropriate cases even under Indian Companies Act it was possible for a liquidator to carry on business of company insofar as it was necessary for beneficial winding-up of company and in that event business receipt will be a trading receipt and not a capital receipt - Held, yes - Whether where liquidator carried on no business and sold outright mining lease with mining rights free from all encumbrances in order to realise and get in assets of company in liquidation, sale consideration would represent capitalised value of mining lease with mining rights and would not be assessable as revenue receipt - Held, yes FACTS Assessee-company and another company were jointly entitled to obtain a mica lease - Assessee agreed to grant of lease solely in favour of other company in lieu of a consideration in addition to sum receivable as share under award of arbitration and sum equivalent to 50 per cent of net profits earned by other company during currency of lease. Assessee went into voluntary liquidation. The ITO held the receipt as a business income, liable to tax. On appeal, the AAC came to the conclusion that the amount received by the assessee was not for determination of any agency agreement but for the assignment of his rights under an agreement and was a capital receipt and not liable to be included in the taxable income of the assessee. On revenue's appeal, the Tribunal confirmed the AAC's finding, observing that it was a case of repayment of capital. On reference : HELD In the instant case, the liquidator reserved no right. He carried on no business. He…

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