COMMISSIONER OF INCOME TAX Vs. KETTLEWELL BULLEN AND CO LTD
HIGH COURT OF CALCUTTA
COMMISSIONER OF INCOME TAX
KETTLEWELL BULLEN And CO. LTD.
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P.B.MUKHARJI J. -
(1.) THIS is a reference by the Tribunal at the instance of the CIT under s. 66(1) of the IT Act. The question of law on which the decision of this Court is sought is as follows :
"Whether on the fact and in the circumstances of the case the sum of Rs. 3,50,000 received by the assessee to relinquish the managing agency was revenue receipt assessable under the Indian IT Act ?"
2. It raises the proverbial controversy between a capital receipt and a revenue receipt. The sum taxed represents the sale price of a managing agency sold by the assessee whose usual business under the memorandum of association is carrying on managing agencies of different companies. The cases are far from unanimous on the point. Before discussing the numerous cases cited at the Bar and the principles laid down there, it will be appropriate to have first a short account of the main facts on which this question arises.
(2.) THE assessee is M/s Kettlewell Bullen and Co. Ltd. The assessment year is 1953-54 and the relevant previous year is the calendar year 1952. The assessee is a public limited company. They
have now five managing agencies in five different companies, namely :
"(1) Fort Gloster Jute Manufacturing Co. Ltd., (2) Bowreach Cotton Mills Co. Ltd., (3) Dunbar Mills Ltd., (4) Mothola Co., Ltd., and (5) Joonktollee Co. Ltd.," In addition to these five different companies of which the assessee is the managing agent, the assessee was also the managing agent of another company, namely, Fort William Jute Co. Ltd., It is in connection with the managing agency of this fort William Jute Co. Ltd., that the question in this reference arises.
The assessee tendered resignation from the office of managing agents of the Fort William Jute Co. Ltd., from 1st July, 1952,, in terms of a sale agreement dt. 21st May, 1952, entered into
between the assessee company and M/s Mugneeram Bangur & Co. This agreement describes the
assessee company as the vendor and M/s Mugneeram Bangur & Co. as the purchaser. Under cl. 6
of this agreement it is provided :
"The purchasers shall procure that the company shall compensate the vendors for their loss of office in respect of such managing agency in the sum of Rupees three lakhs and fifty thousand such sum to be payable to the vendors against submission of their resignaton as managing agents of the company and the purchasers shall reimburse the company such amount."
(3.) THE question raised related to this sum of Rs. 3,50,000. The question is : Is this a revenue receipt assessable under the Indian Income-tax or is it a capital receipt ?
The sum of Rs. 3,50,000 was credited in the P&L a/c of the assessee company and was described
as having been received from Fort William Jute Co. Ltd on account of "compensation for loss of
office". The assessee-company deducted this amount in arriving he net profit as shown in the
return to the IT authorities. The contention of the assessee before the Revenue authorities was
that this sum represented compensation for loss of office and as such was not assessable to tax.;
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