COMMISSIONER OF INCOME TAX Vs. SARADA BINDING WORKS

JUDGEMENT

(1.) BOTH the above references are at the instance of the revenue and the assessee is the same in both the cases. The first case relates to the assessment year 1962-63 and the second relates to the subsequent assessment year 1963-64.

(2.) THE assessee is a registered firm carrying on business as a book binder and publisher. It entered into an agreement dated November 15, 1958, with Shri B. Nagi Reddy under which it obtained the right to run the business of "Chandamama Publications" for a consideration of a fixed sum of Rs. 5,000 per annum plus a sum equivalent to 10 per cent. of the net profits of each year of business. By a settlement deed dated December 24, 1962, Shri B. Nagi Reddy settled his rights under the said agreement on his two grandsons. THE two grandsons sold their rights to the assessee under a sale deed dated October 30, 1963, for a consideration of Rs. 1,50,000.

(3.) THE learned counsel for the assessee, however, submits that the first question referred in T. C. No. 87 of 1968 is wide enough to include the question as to whether there was a sale of the business by Shri Nagi Reddy to the assessee and that even if the reference on the second question is held to be incompetent, that question has to be considered while answering the first question. We are inclined to agree with the learned counsel for the assessee that the first question is wide enough to comprehend the question as to whether there was an outright purchase of business by the assessee. Thus, the first question referred in T. C. No. 87 of 1968 and the only question in T. C. No. 175 of 1969 relate to the nature of the annual payments made by the assessee to Shri Nagi Reddy during the assessment years 1962-63 and 1963-64, i.e., whether the expenditure is of a revenue or capital nature.