EAPEN JACOB K Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following three questions have been referred at the instance of the assesses under section 256(1) of the Income-tax Act, 1961 :

(2.) THE assessee is an individual. He had entered into a partnership on October 18, 1961, with K. Thillai and others. THE business of the partnership was carried on under the name and style of Nilgiri Mining Corporation. THE firm entered into certain contracts with a cement company for supply of bauxite mined in about ten acres of land belonging to the partner, Thillai. Disputes seem to have arisen very soon after the partnership was entered into. THE said Thillai who was owning the bauxite mine seems to have entered into a private contract with the cement company for the supply of bauxite and purported to dissolve the partnership firm with effect from January 17, 1964. THE assessee questioned the dissolution as also the entering into the contract personally directly with the cement company and filed O. S. No. 40 of 1964 out of which the appeal, A. S. No. 220 of 1968, on the file of the District Court, Coimbatore, arose, praying for an injunction, restraining Thillai and the other partners from interfering with his functioning as a partner and also for an injunction directing the cement company not to deal with Thillai individually. THE suit appears to have been decreed and the appeal filed against it by Thillai was dismissed. A second appeal was preferred to this court. Pending these proceedings, Thillai died and his legal representatives came on record. When the appeal was pending in this court, the parties entered into a compromise on November 2, 1972, and the compromise decree reads as follows :

(3.) WE accordingly answer the latter part of the first question in the affirmative and in favour of the assessee and hold that the entirety was capital receipt. In the light of this answer, it is unnecessary for us to answer the other portion of the first question or the second and the third question. The assessee will be entitled to his costs. Counsel's fee Rs. 500.