- (1.) The following question of law was referred to the Special Bench of the Income-tax Appellate Tribunal (Bombay)(page 55) : "Whether the amount of Rs. 1,40,00,000 received by draft dated December 5, 1989, in consideration of surrendering the statutory tenancy rights and/or possessory rights in property situated at Cadell Road, Prabhadevi, Bombay, can be construed to be a casual and non-recurring receipt within the meaning of Sec. 10(3) of the Income-tax Act, 1961, and as such is exigible to tax under Sec. 56 of the Act -
(2.) The above question was answered against the assessee. Hence, the assessee-Cadell Weaving Mill Co. P. Ltd. has come by way of Income-tax Reference No. 123 of 1996. The above question is also raised in conjoint matters. Hence, by this common judgment, all the above matters are disposed of.
(3.) Facts : The assessee, Cadell Weaving Mill Co. P. Ltd., is engaged in the business of weaving and dyeing of cloth. The assessee filed its return of income for the assessment year 1990-91 declaring its income as rupees nil. The Assessing Officer noted that the assessee had receipts from sale of cloth, processing charges and compensation on surrender of tenancy rights. The Assessing Officer found that the assessee had entered into four separate lease agreements on September 26, 1963, with Elphinston Dye Works Private Limited. Under the said agreements, the assessee became tenants/lessees of Elphinston Dye Works Private Ltd. The leases were for 15 years. They were monthly leases. They expired on October 25, 1978. They were not renewed. The assessee continued to occupy the premises. In the meantime, Elphinston Dye Works Private Limited sold the property to Prabhadevi Trading Company Private Limited with the assessee still remaining in possession of the property. Prabhadevi Trading Company moved the Small Causes Court for eviction of the assessee. The suit was filed in 1986. The suit was settled on December 11, 1989. This was by an agreement of even date. Under the said agreement, the assessee was paid Rs. 1.40 crores to vacate the premises. The Assessing Officer treated receipt of Rs. 1.40 crores as casual and non-recurring income chargeable to tax under the head "Income from other sources". This was in view of the decision of the Allahabad High Court in the case of Commissioner of Income Tax V/s. Gulab Chand, 1991 192 ITR 495 . The Assessing Officer accordingly, applied Sec. 10(3) of the Income-tax Act. He also referred to Sec. 115J of the Income-tax Act taking the profit as per the profit and loss account which included compensation from surrender of tenancy of Rs. 1.40 crores. He, accordingly, assessed the income of the assessee at Rs. 1,39,95,500. Being aggrieved, the assessee carried the matter in appeal to the Commissioner of Income-tax (Appeals). The appeal was dismissed, vide order dated September 13, 1993. The reasons given by the Assessing Officer were confirmed. Thereafter, the assessee carried the matter in appeal before the Tribunal. The Division Bench of the Tribunal made a reference under Sec. 253 of the Act to the President of the Tribunal for formation of a Special Bench for considering the above questions. By the impugned judgment, the Special Bench of the Tribunal held that the assessee was a statutory tenant under the Bombay Rent Act. That, the assessee had only the right to remain in possession. That, such a right was personal to the assessee. That, the assessee did not have any estate which could be transferred. That, such a right did not constitute a capital asset under the Income-tax Act. That, surrender of such rights did not constitute transfer under Sec. 2(47) of the Income-tax Act. That, Rs. 1.40 crores received by the assessee as compensation for surrendering the tenancy rights constituted casual and non-recurring income under Sec. 10(3) and was assessable as an "income from other sources." Accordingly, the matter has come before this court.;