Ruma Pal, J. - (1.) The assessment year in question is 1977-78. The issue is whether the amounts received by the assessee/appellant in respect of an abortive sale transaction of rubber trees are capital or revenue receipts
(2.) The assessee is a plantation company engaged in the business of growing rubber and tea. In 1975, it entered into three agreements with three purchasers for sale of old rubber trees. Each of the purchasers paid a certain amount by way of earnest money and another amount by way of advance under their respective agreements. The total amount of earnest money received by the assessee under the three agreements was Rs. 75,000/- and the total amount by way of advance was Rs. 3,56,300/-. All the three purchasers defaulted in payment of the balance amounts. The agreements were accordingly terminated and the amounts of earnest money and advance were forfeited by the assessee. The assessee filed three suits before the Subordinate Judge, Kottayam in this connection. The assessee's right to retain the amounts of earnest money and advance was confirmed by the Court. In 1979, the assessee was eventually successful in selling the old rubber trees to a third party but at a loss.
(3.) In the assessee's return for the assessment year in question, the assessee claimed that the amounts forfeited were not taxable as revenue receipts. The Assessing Officer upheld the contention of the assessee. However, the Commissioner of Income-tax sought to revise the assessment under S. 263 of the Act and held that the amounts forfeited were revenue income and assessable to income tax. The assessee preferred an appeal before the Income-tax Tribunal. The Tribunal set aside the order of the Commissioner and restored the finding of the Assessing Officer.;