BLUE STAR LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY this reference made under S. 256(1) of the IT Act, 1961, the following questions have been referred to this Court for opinion at the instance of the assessee :

(2.) LEARNED counsel appearing for the parties state that controversy in question No. 2 as well as in question No. 3 above is covered by judgments of this Court. Learned counsel further state that the controversy in question No. 2 is covered by the judgment of this Court in the case of Lubrizol India Ltd. vs. CIT (1991) 93 CTR (Bom) 237 : (1991) 187 ITR 25 (Bom) : TC 7R.1527 and the controversy in question No. 3 is covered by two judgments of this Court one in the case of Forbes, Forbes Campbell & Co. Ltd. vs. CIT (1994) 119 CTR (Bom) 319 : (1994) 206 ITR 495 (Bom) : TC 15R.512 and the other in the case of M.H. Daryani vs. CIT (1993) 202 ITR 731 (Bom) : TC 15R.506. In view thereof, the second question as well as the third question are answered in the affirmative, that is, in favour of the Revenue and against the assessee.

(3.) IN the facts narrated above, a dispute arose as to whether the payment of the said sum of Rs. 5 lakhs by BME to the assessee was a "capital receipt" or a "revenue receipt" in the hands of the assessee. The assessee had shown the said amount in its return under the head "Other income" but claimed that it was not taxable being a capital receipt. The claim of the assessee was rejected by the ITO who held that the arrangement between BME and the assessee borne out by the said agreement did not create any income apparatus and that the assessee had only a service contract with BME. It was further held by the ITO that there was no destruction of any income apparatus and that the amount received was not in respect of any loss of source of income but was only in respect of the actual loss of income itself for a period of one year. The CIT(A), on appeal, decided the issue in favour of the assessee and held that the receipt of the said amount of Rs. 5 lakhs in the hands of the assessee was a "capital receipt" and was not taxable. The Department, thereupon, filed an appeal before the Tribunal. The Tribunal held that the said sum of Rs. 5 lakhs received by the assessee was not a "capital receipt" but was a "revenue receipt". Hence, the abovementioned first question has been referred to this Court for the opinion at the instance of the assessee.