M. R. GOYEL, PROP. M/S MILKHIRAM BROS. BOMBAY versus THE COMMISSIONER OF INCOME TAX, BOMBAY CITY 1, BOMBAY

Citation: [1969] 3 S.C.R. 669 · Decided: 12-02-1969 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Judgment (excerpt)

669 
A M. R. GOYEL, PROP. MIS MILKllIRAM BROS. BOMBAY 
B 
c 
D 
E 
F 
G 
H 
v. 
THE COMMISSIONER OF INCOME TAX, BOMBAY 
CITY 1, BOMBAY 
February 12, 1969 
[J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.) 
Jncome·tax-Person entering into 
contract for purchase of goods-
Thereafter transferring benefit of contract for consideration-Whether con• 
sideration received wa.r capital receipt or revenue. 
Uie appellant entered into a contract for the purchase of a large 
quantity of parachutes from the T. Company. The agreed purchase price 
was over Rs. 93 lacs and the assessee was required to deposit a sum of 
Rs. JO lacs by way of earnest money. As he did not have enough funds, he 
entered into an arrangement with certain other persons whereby the amount 
of Rs. 10 lacs was to be deposited by them and they were to receive a "net 
profit share of 9 annas in a rupee". The financiers later withdrew from 
the arrangement and the benefit of the contract for the purchase of para-
chutes was transferred to a firm for a sum of Rs. 3 lacs on November 30, 
1946. A few days later another partnership took over the contract of pur-
chase. The Income-tax Officer reopened the appellant's assessment for 
the assessment year 1947-48 on the ground that the income of Rs. 3 lacs 
had escaped assessment. After the appellant had failea in an appeal to 
the Appellate Assistant Commissioner, the Tribunal found that the appel-
lant had in fact only received a sum of Rs. 1,87,000/- and rejected-his 
contention that this amount was in the nature of a premium for giving up 
his right to do business in parachutes and was, therefore, in the nature of a 
capital receipt and not revenue. It held that the assessee had received 
profit in respect of a venture in the nature of trade. The High Court, 
upon a reference, upheld the view taken by the Tribunal. 
In appeal to this Court it was contended on behalf of the appellant 
that the agreement which he bad entered into with the T. Company was a 
capital asset or a source of possible income and the transfer which was 
made, was not of the good! which were to be acquired under the contract 
but the source itself, namely the appellant's share, right, title and interest 
was transferred and furthermdre the amount in question was received by 
the appellant for relinquishing his right to participate in the partnership 
which had been formed and from which he withdrew. It could not, there-
fore, partake of the character of a revenue receipt. 
HELD : Dismissing the appe,al, 
The Tribunal had rightly held that the appellant i~nded "to do and 
did a venture in the nature of trade". When the appellant agreed to accept 
a sum of Rs. 1,87,000/- in consideration for transferring the benefits of 
the contract, be could well be said to have concluded a deal which repre-
sented the profit which he anticipated by acquiring the parachutes. 
The High Court had rightly found that the arran~ement made by the 
appellant with certain parties to finance tho transaction in return for a 
share of 9 annas in a rupee, was one which had been made between a 
person in need of money and certain financiers and that no partnership bad 
come into force. 
Accordingly there could be no question of the appellant 
having relinquished a share in the partnership. (673 CJ 
. LlOSup./69-8 
670 
SUPREME COURT REPORTS. 
[1969] 3 S.C.R. 
CIVIL APPELLATE JuRISDICTlON: Civil Appeal No. 681 of 
A 
1968. 
Appeal by special leave from the judgment and order dated 
September 29, 1961 of the Bombay High Court in Income-tax 
Reference No. 46 of 1969. 
I. N. Shroff, for the appellant. 
S. K. Mitra, S. A. L. Narayan Rao and B. D. Sharma, for the 
respondent. 
The Judgment of the Court was delivered by 
Grover, J. This is an appeal by special leave from a judgment 
of the Bombay High Comt answering the 
following 
question 
referred to it by the Income Tax Appellate Tribunal in the affirma-
tive and against the assessee ; 
'"Whether on the facts and circumstances of the case 
the receipt of Rs. 1,87,000 in the hands of the assessee 
is a revenue receipt and liable to income-tax ?" 
The assessee used to carry on his business under the name and 
style of Milkhiram Bros. 
He was being assessed from the year 
1945-46 onwards. 
On October 31, 1946 he secured a contract 
for the purchase of approximately 1,28,499 parachutes from Tata 
Aircraft Ltd. 
The parachutes belonged to the Government of 
India and the Tata Aircrafts Ltd. was acting as the agent of the 
Government

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