- (1.) These are connected appeals brought here on the strength of certificates granted by the High court of Allahabad. The High court was requested to give its opinion on three of the questions herein below noted: "(1) Whether on the facts and in the circumstances of the case, the receipt of Rs. 35,01,000. 00 constituted income liable to tax under S. 10 of the Income-tax Act (2) Whether it was competent to the Appellate Assistant Commissioner to invoke the. provisions of S. 122 for the assessment of rs. 35,01,000. 00 when the Income-tax Officer had assessed the amount under S. 10 of the Income-tax Act (3) Whether on the facts and in the circumstances of the case the receipt of Rs. 35,01,000. 00 was taxable under S. 12-B of the Income- tax Act -
(2.) The High court answered questions Nos. 1 and 2 in favour of the revenue and question No. 3 in favour of the assessee.
(3.) The controversy in this case is as to whether the payment of rs. 35,01,000. 00 made to the assesee under agreement dated 7/10/1946 between the Jaipuria group and the assessee group, is. a capital receipt or a revenue receipt. The tribunal has come to the conclusion that the said receipt was a capital receipt. But the High court had disagreed with that view. Under the agreement the assessee had given up its selling agency right as well as the shares in the managing agency etc. right. Clause 9 of the agreement provided as follows : "It is agreed that one or other of the Bagla or Jaipuria groups shall retire from the said partnership with effect from 6/10/1946. The continuing group shall pay to the retiring group their shares of the capital and interest thereon and compensation which shall include the price of goodwill and the share of the retiring partner in the profits of the firm up to 5/10/1946. The question as to which of the said two groups shall retire and what amount of compensation shall be paid by the continuing group to the retiring group shall be determined by auction held in the manner set out hereinafter. Such auction shall be held forthwith. The auction shall be conducted by Dr. Brijendra swarup, Advocate of Kanpur and Mr. B. P. Khaitan, Solicitor of calcutta. Only partners shall be entitled to attend the auction. Rai bahadur Rameshwar Prasad Bagla and St. Mangtoram Jaipuria will give bids on behalf of their respective groups and the respective groups shall be bound by bids so given by their aforesaid respective nominee. The group offering to pay the highest compensation shall continue as partners in the firm and the other group shall retire as herein provided. The continuing group shall pay to the retiring group within 10 days from the date of the auction the following: (A) The amount of capital contributed by the retiring group with interest calculated at the rate of 41/2%. (B) And compensation money ascertained as aforesaid. ";