Shah, J. - (1.) This appeal is filed against the judgment and order dated 8th September, 1993 passed by the High Court of Calcutta in Income-tax Reference No. 91 of 1988 (reported in 1994 Tax LR 31). The Court allowed reference application and answered the following referred to it in the negative and in favour of the Revenue (at P. 32):-"Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in confirming the decision of the C.I.T. (Appeals) that the receipt of Rs. 29,47,500 by the assessee from the Receiver or the hotel in the course of assessee's hotel operation business, is a capital receipt."
(2.) The said question arose in the Income-tax assessment of the assessee-company for the year ending on 30th June, 1978 corresponding to the Assessment Year 1979-80 in the background of the fact that the assessee-company was operating, managing and administering many hotels belonging to others for a fee at several places, e.g. Cairo, Colombo, Kathmandu, Singapore, etc. As per the Memorandum of Association of the Company, it was authorised to run hotels on its own account and also to operate, manage and administer hotels belonging to others for a fee. In terms of an Agreement dated 2nd November, 1970, the Company agreed to operate the hotel known as Hotel Oberoi Imperial, Singapore for which the assessee-Company was to receive certain fee called Management Fee which was calculated on the basis of gross operating profits as provided under Article X of the Agreement; the Agreement was to run for an initial period of ten years; the assessee had option to ask for renewal of the said Agreement for two further periods of 10 years each by mutual agreement. Article XVIII of the said Agreement gave the assessee a right to exercise the option of purchasing the hotel in case his owners desire to transfer the same during the currency of the Agreement. Thereafter on 14th September, 1975 a Supplementary Agreement was executed between the appellant and the Receiver of the Undertaking and the property of Imperial Securities International Limited, which, inter alia, provided that on 6th day of September, 1975 Receiver was appointed of the Undertaking and property of ISI pursuant to the terms of the Debenture dated 7th day of January, 1974 made between ISI on one part and Common Wealth Development Finance Company Limited on the other part. On the basis of the said appointment of Receiver, the Receiver executed the Supplemental Agreement in favour of the appellant which, inter alia, provides that: "g. The Operator hereby undertakes and agrees with the Receiver as follows: (a) that Article XVIII of the Principal Agreement shall henceforth cease to have any force and effect; (b) that the Receiver shall, subject to the provisions of Clause 8 hereof, be at liberty at any time hereafter to sell or otherwise dispose of the said property at such period and on such terms as he may deem fit and shall not be under any obligation of procuring or requiring the purchaser thereof to enter into any agreement with the Operator for the purpose of operating and managing the Hotel or otherwise; (c) that should the Receiver succeed in selling or disposing of the said property to any party, the Principal Agreement and this Agreement shall, upon completion of such sale as may then be made by the Receiver, terminate and cease to have any force and effect; (d) that the operator shall do execute and deliver all such acts, deeds, documents and instruments as may be necessary or reasonably required by the Receiver for the purpose of giving effect to the provisions of this clause. 10. For the consideration aforesaid the Receiver hereby agrees to pay to the Operator. a) ********** b) simultaneously termination of the Principal Agreement and this Agreement- i) a sum of $250,000/- if the said property is sold for sum of less than S $30,000,000-or ii) a sum of S $375,000/- if the said property is sold for a sum of S $3,300,000 or more than but less than S $33,500,000/- or iii) a sum of S $750,000/- if the said property is sold for a sum of S $33,500,000/- or more." The right of the assessee, which was given up for a consideration mentioned above, arising from Article XVIII of the Principal Agreement is as under: "During the term of this Agreement in the event where the owner desired to transfer the Hotel or lease all or part of the Hotel to any other person, firm or corporation, the same shall be first offered to Operator or any of its nominee or affiliates."
(3.) On the basis of the said agreement the assessee has received a sum of Rs. 29,47,500/- from the Receiver after the sale of the hotel. The question which was considered by the Income Tax Authorities was whether the receipt of the said amount is capital receipt or revenue receipt. The Income-tax Officer arrived at a conclusion that it was a revenue receipt, Commissioner of Income-tax (Appeals) held that it was a capital receipt, the Tribunal confirmed the said finding, on reference to the High Court, the High Court arrived at a conclusion that it was a revenue receipt assessable to Income-tax as business income for the Assessment Year 1979-80. Hence, this appeal by special leave by the assessee.;