COMMISSIONER OF INCOME TAX Vs. DEEPAK KUMAR AGARWAL

JUDGEMENT

(1.) THE question referred to us at the instance of the Revenue is as to whether the sum of Rs. 42,294 received by the assessee from one V. V. Raman who was the assessee's power of attorney holder and who had been asked to set up a company at Bombay, but who misused the authority given by the assessee, by setting up a company for his own benefit making himself and his wife the owners of the company, and against whom the assessee had filed a suit in C. S. No. 182 of 1972, for rendition of accounts which suit ended in compromise in terms of which the sum of Rs. 42,294 was paid in the hands of the assessee, a receipt of a capital nature and hence is not to be treated as the income of the assessee. THE assessment year is 1976-77.

(2.) THE undisputed facts are that the assessee is a person doing" business in garments who had started a branch at Bombay, in the name of Kala Niryat and had appointed one V. V. Raman, to manage it. THE said Raman who was subsequently asked to set up a company in order to enable the assessee to receive the benefits of export of Indian handlooms, fabrics and garments, as under the Import Trade Control Policy of the Government of India as revised in 1968 only companies registered under the Companies Act, Co-operative Marketing Societies and Federations registered under the appropriate law were eligible for being accorded recognition as export houses. Some of the benefits receivable by such export houses included release of foreign exchange, grant-in-aid, etc., as stated in the order of the Appellate Assistant Commissioner.

(3.) THE argument for the assessee advanced by learned counsel for the assessee that the receipt was of a capital nature as it involved the transfer of ownership of the company cannot be accepted as the very terms of the compromise provided that no consideration was payable for the transfer of the shares in that company to the assessee. THE sum of Rs. 75,000 paid to the assessee was in addition to the transfer of the shares and independent of the transfer.