NIRANJAN LAL RAM CHANDRA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is an income-tax reference under section 66(1) of the Act. The question which has been referred to this court for opinion is Whether, on the facts and in the circumstances of the case, the sum of Rs. 5,347 was income arising to the assessee during the course of the business and liable to tax?

(2.) THE facts giving rise to the reference are that during the previous year relevant to the assessment year 1950-51, the assessee was given a sum of Rs. 16,000 by the State Government as compensation for loss and expense sustained by him by reason of the abandonment by the Government of the scheme of floating the Hind Roadways Corporation. THE assessee was a motor operator and was also a dealer in motor-cars and trucks. Some time prior to the previous year the State Government decided that motor transport business should be taken over by a Corporation and should not be allowed to be done by individual operators. As the assessee had experience of motor transport business he was called upon to promote the corporation which was intended to be called the Hind Roadways Corporation. THE assessee was promised the managing agency of this corporation when it came into existence. Subsequently, however, it appears that the Government decided to run roadways services by its own department and not along with private operators under the proposed corporation. Meanwhile the assessee had been devoting his time and attention and making a survey of various districts in order to organise and to bring into existence the proposed corporation. In doing so he incurred expenditure to the extent of Rs. 10,653. In his account books he credited the sum of Rs. 16,000 to the account which he styled as the rail-road transport account and in this very account he debited the expense of Rs. 10,653. In these circumstances the question arose as to what was the nature of the balance in this account amounting to Rs. 5,347 and whether it was liable to be assessed to income-tax.

(3.) FROM this finding the following inferences seem to be derivabl :