COMMISSIONER OF INCOME TAX Vs. BARIUM CHEMICALS LIMITED

JUDGEMENT

(1.) This consolidated reference under section 256(1) of the Income-tax Act, 1961, arises out of a common order made by the Income-tax Appellate Tribunal Hyderabad, in ITA Nos. 1286 and 1296 of 1975-76. The relevant assessment year is 1968-69. The questions referred to this court are as follows : Questions raised by the Revenue :

(2.) The Income-tax officer (the assessing authority) considered the question whether the aforesaid amounts constituted capital receipt or revenue receipt. The contention raised by the assessee was that the entire amount received under the settlement dated 22/02/1967, represented compensation for liquidated damages and so the same should be treated as capital in nature. The Income-tax officer, after considering the submissions made by the assessee, excluded the amount of Rs. 1,61,008 on account of the value of spares and stores left at the erection site and treated the balance amount as revenue receipt liable to tax under the provisions of the Income-tax Act. On appeal, the Appellate Assistant Commissioner came to the conclusion that the value of the kiln ($ 27,000 = Rs. 5,66,513) supplied by the English company and the surrender of claim for the credit balance of Rs. 2,38,942 standing to the account of the English company in the account books of the assessee should not be construed as revenue receipt. After excluding these two items, the Appellate Assistant Commissioner held that the balance amount of Rs. 47,20,939 should be treated as revenue receipt. Aggrieved by this, the assessee preferred an appeal to the Income-tax Appellate Tribunal.

(3.) As regards the two items held against, both the assessee and the Revenue preferred appeals to the Income-tax Appellate Tribunal which held that the amount of Rs. 47,20,939 in its entirety should be treated as a capital receipt. It also rejected the alternative submission made on behalf of the Department that in the event of the amount being treated as capital in nature, it should be assessable to capital gains tax.