- (1.) THE Income-tax Appellate Tribunal has referred the following question of law arising out of its order, dated May 21, 1982, in respect of the assessment year 1975-76 under Section 256(1) of the Income-tax Act : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the receipt of Rs. 1,00,101 was capital receipt and not revenue receipt and was not taxable ?"
(2.) THE brief facts of the case are that the assessee has taken a plot of land from Smt. Jatan Kanwar for construction of a cinema hall. Due to financial problems the company went into liquidation and the work of construction of the cinema was not completed. THE official liquidator was pressed by the creditors of the assessee-company to surrender the plot of land along with the incomplete structure of the cinema to the original owner, namely, Smt. Jatan Kanwar. THE lease of the plot was given for a sum of rupees 5,00,000 for 99 years. THE owner agreed to make the payment of the advance of Rs. 5,00,000 which was given to her by way of advance towards lease money and a sum of Rs. 7,00,000 towards the cost of the incomplete construction of cinema. Besides this, a sum of Rs. 1,00,101 was also received for loss in respect of surrender of lease right of the assessee to exhibit the films. THE dispute is with regard to the sum of rupees 1,00,101 as to whether it should be treated as a capital receipt or a revenue receipt. THE Income-tax Appellate Tribunal found that the construction of the building was not completed and the assessee had not started exhibiting the films in the cinema (since the cinema was not constructed), the amount of Rs. 1,00,101 received by the assessee, therefore, was considered a capital receipt and not a revenue receipt. Reliance is also placed on a decision of the apex court in Senairam Doongarmal v. CIT [1961] 42 ITR 392, wherein it was held that the crucial point to determine whether a given receipt is a business receipt is if there was a business at all of which it could be said to be income. If there is no business, then there can be no business income. Following the said decision it was held that surrendering the leasehold rights and the rights to exhibit films before the cinema came into existence will not be of revenue nature. We have considered the arguments of both learned counsel for the parties. For the purpose of income to be of revenue nature it must arise from the various sources which have been given under the Act. One of such sources is business income, there may be other sources of income like salary, other sources, etc. but the volume, frequency, continuity, regularity and the intention of the assessee to carry on business has to be seen for the purpose of determining a particular receipt as business income, When the business itself has not come into existence, it cannot be considered to be a business income and, therefore, cannot be a revenue receipt. In these circumstances, we are of the view that the Income-tax Appellate Tribunal was right in holding that the receipt of Rs. 1,00,101 was a capital receipt and not a revenue receipt and was not taxable. Accordingly, the reference is answered in favour of the assessee and against the Department with no order as to costs.;