- (1.) AT the instance of the Revenue, the Income-tax Appellate Tribunal has referred the following questions for the opinion of this court under Section 256(1) of the Income-tax Act, 1961 : " (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that out of the interest of Rs. 1,09,492 interest pertaining to this year alone was liable to be included in the assessment ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the compensation of Rs. 83,700 was the capital receipt and could not be taxed as a revenue receipt ?"
(2.) SO far as the first question is concerned, that is fully covered by an inter-parties decision in Moti Lal Chaddami Laljain v. CIT [1980] 122 ITR 949 (All) in which the question was answered by this court in favour of the Revenue. Following the said decision, question No. 1 is answered in the affirmative, that is, in favour of the Revenue and against the assessee. Turning to question No, 2, the facts, in brief, are that the assessee-a Hindu undivided family--(HUF), owns a factory, styled as Vimal Glass Works near Firozabad in which the business of manufacture of glassware was carried on in the previous year, relevant to the assessment year 1973-74. By a notification issued under Section 4 of the Land Acquisition Act, 1894, on December 11, 194b, the District Collector, Agra, acquired a part of the land, possessed by the assessee, admeasuring 1,835 acres for the purpose of construction of a railway siding at Firozabad. The possession of this land was taken on May 26, 1949, from the assessee and a total compensation to the tune of Rs. 83,700 was awarded to the assessee. The Income-tax Officer held that the compensation received by the assessee was liable to be taxed in its hands as a trading receipt. On appeal by the assessee, the Appellate Assistant Commissioner found that the compensation awarded to the assessee constituted a capital receipt. On appeal by the Revenue to the Appellate Tribunal, the view taken by the Appellate Assistant Commissioner was accepted.
(3.) THE short question for consideration before us is whether the compensation awarded under the Land Acquisition Act, constituted a capital receipt. The question is, no doubt, ticklish, but not without a guideline. In CIT v. Vazir Sultan and Sons [1959] 36 ITR 175, the Supreme Court approvingly reproduced the principles as stated by Romer L. J. in Golden Horse Shoe (New) Ltd. v. Thurgood [1933] 18 TC 280, 300 (CA) as follows (page 183) : " The determining factor must be the nature of the trade in which the asset is employed. The land upon which a manufacturer carries on his business is part of his fixed capital. The land with which a dealer in real estate carries on his business is part of his circulating capital. The machinery with which a manufacturer makes the articles that he sells is part of his fixed capital. The machinery that a dealer in machinery buys and sells is part of his circulating capital, as is the coal that a coal merchant buys and sells in the course of his trade. So, too, is the coal that a manufacturer of gas buys and from which he extracts his gas." (underlining* by the court). ;