B G SHAH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference at the instance of the assessee under S. 256(1) of the IT Act, 1961. The questions to be considered read thus:

(2.) THE assessee is an advocate. He entered into an agreement with the Indian National Press (Bombay) Pvt. Ltd. for obtaining on monthly tenancy ground floor premises in a building on Dalal Street, Fort, Bombay. The assessee filed a suit in the City Civil Court at Bombay (being Suit No. 4978 of 1962) for specific performance of the said agreement. While the suit was pending, the assessee came to learn that the Bank of Baroda was interested in the said premises. He approached the Indian National Press (Bombay) Pvt. Ltd. and requested it to negotiate with the bank to their mutual advantage. As a result, the assessee received an amount of Rs. 37,500 from the Indian National Press (Bombay) Pvt. Ltd. by way of compensation for non performance of the said agreement.

(3.) THE Revenue appealed to the Tribunal. Reliance was placed on behalf of the Revenue upon the statement made by the assessee in the said suit that he was carrying on business as sole proprietor of Badrawal Traders. It was urged that if the assessee was carrying on this business at Abdul Rehman Street, as the plaint stated, there was no reason why the assessee should have proposed to take the said premises unless it was in regard to a business making proposition. The assessee, on the other hand, contended that no business had ever been carried on by him; that a trade name was fixed at the time of obtaining the tenancy; that the compensation had been received for not obtaining the tenancy; and that the tenancy right had not been obtained in the regular course of business. The Tribunal found that it could not, in view of the said statement in the plaint, accept the assessee's oral plea that he had never carried on business. The fact that the assessee, when he came to know that the Bank of Baroda was interested in the said premises, had approached the Indian National Press (Bombay) Pvt. Ltd. and requested it to negotiate with the bank to their mutual advantage made it clear to the Tribunal that the assessee was interested in the tenancy as a business and a profit making proposition. The Tribunal was, therefore, compelled to conclude that the assessee had entered into the said agreement in the course of his business. The compensation received for its termination was, in its view, a revenue receipt.