VIJAYPAT SINGHANIA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) VIJAYPAT Singhania, the assessee, was, in the year 1944-45, a minor. He had been admitted to the benefits of a partnership firm, Messrs. Juggilal Kamlapat. This firm acted as managing agents of Messrs. J.K. Cotton Manufacturers Ltd. The company prematurely terminated the managing agency of the firm and paid Rs. 2,50,000 as compensation to the firm. The firm claimed this amount as a capital receipt for the loss of its income earning apparatus. This claim was negatived. It was held that the termination of the managing agency was a collusive affair based on extra-commercial reasons. The receipt of Rs. 2,50,000 was not capital in nature but revenue in its true nature and character. The case that it was compensation for the loss of managing agency was disbelieved.

(2.) IN that assessment year, the firm Messrs. Juggilal Kamlapat, being registered, was not liable to tax. Hence, the amount of Rs. 2,50,000 was apportioned to its partners. The assessee's share came to Rs. 66,406.