COMMISSIONER OF INCOME TAX Vs. VOYANTIZIES J

JUDGEMENT

(1.) IN this reference under S. 66(1) of the Indian INCOME TAX ACT, 1922, the question of law referred to this Court reads as follows :

(2.) BY a requisition order dated 25th April, 1942, the Government of India requisitioned and directed delivery of possession of the property to the army authorities. The requisition was to continue for the period of the war and six months thereafter. The assessee, thereupon, made certain representations and the army authorities then made a catering contract with the assessee. He carried on the business of this catering contract and served the army authorities thereunder from 1st January, 1943, to 31st October, 1943. That contract was then terminated and from 1st November, 1943, the premises continued in the possession of the army authorities. The catering contract was from that date given to the landlords of the premises. In this connection another order dated 13th November, 1942, was passed and under that order the entire premises along with the equipment for catering was taken over by the Government. Having regard to the above situation on 31st October, 1943, the assessee sold away some equipment that he had purchased for running the catering business also to the landlords of the premises. The assessee, thereafter, by his letter dated 19th October, 1945, lodged a claim for Rs. 6 lakhs. The particulars of the claim were that the assessee would make profit of Rs. 15,000 per month and Rs. 1,80,000 per year ; he would have to bear income -tax at the rate of 65per cent and would after deduction of the income - tax earn Rs. 60,000 per year. The lease was to be for a period of 5 years and with option to extend it for another period of 5 years. For the period of 5 years of the lease he was entitled to Rs. 3 lakhs for disturbance and Rs. 3 lakhs for goodwill making Rs. 6 lakhs in all.

(3.) IN connection with the sum of Rs. 40,000 which had already been paid to the assessee on 6th May, 1946, on behalf of the Revenue, it was contended that it was trading receipt and liable to tax. The Tribunal negatived that claim by its order dated 13th February, 1953, by holding that the business which the assessee had carried on after the requisition order was served as up to 31st October, 1943, was not the hotel business. It was a catering business carried on under the directions and on behalf of the military authorities. That business was not the same business as the assessee had intended to start, namely, running of an upto date hotel. The Tribunal also found that as a result of the requisition the assessee had not remained a tenant of the building. The assessee had in fact sold away about November, 1943, some equipment he had purchased as a caterer to the landlords and the assessee had no assets of his own in use in the business at any time. The Tribunal accordingly held that the sum of Rs. 40,000 was not trading receipt and liable to tax.