COMMISSIONER OF INCOME-TAX POONA versus M/S. MANNA RAMJI & CO.

Citation: [1973] 1 S.C.R. 1068 · Decided: 29-08-1972 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Appeal(s) allowed

Judgment (excerpt)

1068 
COMMISSIONER OF INCOME·TAX POONA 
v. 
MJS. MANNA RAMii & CO. 
August 29, 1972 
(K. S. HEGDE, P. JAGANMOHAN REDDY AND H. R. KHANNA, JJ.] 
· Indian Income Tax, 1911-Capltal Receipt/I and Revenue Receipts-
Compensation paid by .Govt. for lolls of earning where the business pre-
mises ate fequisitioned-Whether Revenue Receiptr. 
The respondent 'Yas carrying on timber business in premises consisting 
Jf oflk~ r<Jl)m ·and six sheds. 
In 1944, the premises were requisitioned 
mder the ~fence of India Act for storing food grains. On request of 
the respondent, however, the office roon was relea5ed wherein the ap-
J>eilant contimied to carry on the timber business. The respondent claimed 
compensation of Rs. 1,25,500 for loss of earnings which was awarded. The 
Income Tax Officer brought to tax the said amounf attributing the earning 
to business of timber, as rev.enue receipts. 
On responderit's motion, the 
following questlion was referred to the High Court by t,he Income Tax Ap-
pellAte Tribunal : "whether, on facts and circumstances of the case, the 
sum of Rs. 1,05,074 received by the applicant as compensation from the 
Government is taxable as income of the applicant or is a capital receipt 
in its hands:' The High Court answc.ced the questlion against the Re\•enue. 
On appeal by the revenue, 
HELD : On ihe facts found by the Trlbun•'.. namely, that the cOOil.• 
pensation was cla.;med and awarded for loss oi profits the respondent 
continued the said business in its usual name and style in the same office 
premises, and the profit making apparatus itself was not destroyed, the 
compensation amount partakes the character of profits 
and therefore 
"Revenue receipts. !I 072EJ 
Held further, the present is not a case wherein the respondent filll'. 
was permanen1ly deprived of a source of income. On the contrary, the 
present is a case arising out of requisition of the premise... 
Requisition 
unlike· acquisition, is of a temporary nature. The compensation paid to 
the respondent represents the supposed profit which the respondent would 
have earned during the years the premises remained under requisition, 
[1072GJ 
but which profit ~he respondent could not earn because of the requisition. 
Commissioner of Income Tax/Excess .Profits Tax; Bombay City v. 
Shamsher Printing Press, [19601 39 I.T.R. 90. referred to. 
Also held, the method of computing the compen9ation payable for Joss 
of earnings does not alter the real charac~r of essential nature of the 
receipt of the compensation in the hands of the respondent. The Arbi• 
trator awarding ihe compensaticn on the basis of two )rears' purchases 
cannot be assailed. (1073EJ 
The Glembo/d Union Fireclay Co. Ltl. v. The Commissioner of In-
land Revenue, 12 T.C. 427 and Senaircm Doongarma/I v. Commissioner 
of Income Tax, (1961J 42 J.T.R. 392 (on p, 397), relied upon. 
Commissioner of Income Tax, Nagpur v. Rai Bahadur Jairam Vahl 
and Others (1959) 35 l.T.R. 14F, S.R.Y. Sivaram Prasad Bahadur v. Com· 
missioner of Income Tax, Andhra Pradesh, [1971) 82 I.L.R. 527 anti 
Commissioner of Income Tax, Punjab Haryana, Jammu and Kashmir 
and Himachal Pradesh v. Pmbhu Dayal [1971] 82 1.T.R. 804, hel<f not 
appiidable. 
·Karnani Properties Ltd, v. Commissioner oj Jncome Tax, West Bengal 
(1971] 82 I.T.R. 547, referred to. 
The appeal was allowed, 
A 
B 
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D 
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G 
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A 
B 
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D 
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G 
H 
C.I.T. v. M. RAMJI & co. (Khanna, J.) 
!069 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 156 of 
1969. 
Appeal by certificate from the judgment and order dated the 
10th and 11th February, 1967 of the Bombay High Court in 
Income-tax Reference No. 35 of 1962. 
B. B. Ahuja, R. N. Sachthey and S. P. Nayar, for the appel~ 
!ant. 
R. M. Hajarnevis, S. Balakrishnan, G. P. Sahasrabhudhe and 
N. M. Ghatate, for the respondent. 
The ! udgment of the Court was delivered by 
Khanna, J, 
This appeal on certificate granted by the Bom-
bay High Court is dir!!"ted against the judgment of that court 
whereby it answered th~ question referred to it under section 66 ( 1) 
of the Indian Income Tax Act, 1922 (hereinafter referred to as 
the Act) in favour of the respondent assessee. 
The reference arose out of the assessment made upon the res-
pondent firm for the assessment year 1951-52, the account year 
for which is the Samvat year 2006 (that is, October 22, 1949 to 
November 9, 1950). The respondent was carrying on business 
for several years in the past in timber unaer the name and style 
of Manna Ramji 

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