Decided on June 08,1993



R.V. Easwar, Judicial Member - (1.) MR. C.R. Datta, the assessee herein, is a Barrister of Lincoln's Inn practising in the Calcutta High Court. He wrote a book on Company Law. In the year 1970 he entered into an agreement with M/s. Eastern Law House (ELH), Calcutta by which he granted permission to the publishers (i.e., ELH) to publish the book, subject to payment of royalty. The book itself came to be written later. The first edition was published in 1973 and the second edition in 1976. There was no further edition of the book brought out by ELH and the agreement with ELH was terminated on 21-2-1982 by a written agreement.
(2.) The assessee thereafter entered into an agreement with M/s. Orient Law House, publishers (OLH, for short). This was on 25-5-1982, By the agreement, the assessee purported to sell the 'copyright' as well as 'the goodwill' in the book for a sum of Rs. 5 lakhs, bifurcated into Rs. 4 lakhs for goodwill and Rs. 1 lakh for the copyright. The amount of Rs. 5 lakhs was received as below: JUDGEMENT_6811_TLIT0_19930.htm In the returns filed for the assessment years 1983-84 and 1984-85, the assessee claimed that the receipts were not taxable since, according to him, they were capital receipts. The assessee further claimed that the receipts cannot be taxed as capital gains also since both gopdwill and copyright were self-generated assets having no cost of acquisition. It was also contended that the assessee had assigned the copyright and sold the goodwill to OLH under the agreement and it was not a case of mere licence to use these assets.
(3.) THE ITO did not accept the contentions. He took the view that the assessee's brain was his fixed capital and the book, a product of the brain, was floating or circulating capital, or, in other words, the assessee's stock-in-trade and, therefore, the receipts from OLH were taxable as the assessee's income. THE receipt of Rs. 2 lakhs in the accounting year relevant to the assessment year 1983-84 was brought to tax under the head "Other sources" and the receipt of an identical sum in the accounting year relevant to the assessment year 1984-85 was brought to tax under the head 'Profession'.;

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