SENAIRAM DOONGARMALL versus COMMISSIONER OF INCOME-TAX, ASSAM

Citation: [1962] 1 S.C.R. 257 · Decided: 13-03-1961 · Supreme Court of India · Bench: J.L. KAPUR · Disposal: Appeal(s) allowed

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Judgment (excerpt)

1 s.c.R. SUPREME COURT REPORTS 
257 
SENAIRAM DOONGARMALL · 
v. 
COMMISSIONER OF INCOME-TAX, 
ASSAM 
(J. L. KAPUR, M. HIDAYATULLAH and J. c. 
SHAH, JJ.) 
Income Tax-Capital or Revenue-Tea estate-Requisition of 
factories and buildings-Stoppage of tea business-Compcnsation-
Nature of-Indian Income-tax Act, 1922 (II of 1922), s. IO. 
The assessee, a Hindu undivided family, owned a tea estate 
in Assam comprising a tea garden, factories, labour quarters, 
staff quarters etc. On February 27, 1942, the military autho-
rities requisitioned all the factory buildings etc., under the 
Defence of India Rul~s but the tea garden, however, was left in 
the possession of the assessee. The possession of the military 
continued till the yearr945 and during that period, though the 
assessee looked after its tea garden, its business as tea-growers 
and tea-manufacturers could not be continued. Under the 
Defence of India Rules, the military authorities paid the assessee 
as compensation a sum of Rs. 2,22,080 for the year 1944· which 
included Rs. 10,000 for repairs to quarters for labourers, and a 
sum of Rs. 2,46,794 for the year 1945, which included Rs. 15,231 
for repairs. For the assessment years 1945-1946 and 1946-47 
the question arose as to whether the aforesaid sums or any por-
tion thereof were capital receipts or were revenue receipts and 
Jiable to tax. The facts showed that the business, which the 
assessee had been carrying on, consisted in growing tea plants 
and in making tea out of the leaves by a manufacturing process 
into a commercial commodity, that without the factory and the 
premises the tea leaves could not be dried, smoked and cured to 
become tea, and that the result of the requisition of the fac-
tories was to stop the business. 
Held, that the amounts paid by the military authorities 
were received by the assessee not as compensation for the loss of 
profits of the business which it had been carrying on but for 
the injury to the business as a whole, because the entire structure 
of business was affected to such an extent that no business was 
carried on by the assessee during the two years in question. 
Accordingly, the compensation could not bear the character 
of profits of a business and was not liable to tax under s. IO of 
the Indian Income-tax Act, 1922. 
Income-tax Commissioner v. Shaw Wallace & Co., (1932) L.R. 
59 I.A. 206, referred to and applied. 
Case law reviewed. 
33 
Mat'ch IJ. 
Senairatn 
258 
SUPREME COURT REPORTS 
(1962] 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 
535 of 1958. 
Doongarmall 
Appeal from the judgment and order dated March 
v. 
29, 1955, of the Assam High Court in I.T.R. No. 1 of 
Commissioner of 1954. 
· 
Income-ta~. Assam 
A. V. Viswanatha Sastri and D. N. Mukherjee, for 
the appellants. 
Hardayal Hardy and D. Gupta, for the respondent. 
1961. March 13. The Judgment of the Court was 
delivered by 
Hidayatullah ]. 
HIDAYATULLAH, J.-This appeal which has been 
filed with a certificate under s. 66(A)(2) granted by 
the High Court of Assam against its judgment and 
order dated March 29, 1955, concerns the assessment 
of the appellants, a Hindu undivided family, for the 
assessment years, 1945-1946 and 1946-1947. 
The appellants owned a tea garden called the 
Sewpur Tea Estate in Assam. They had on the Estate, 
factories, labour quarters, staff quarters etc. 
On 
February 27, 1942, the Military authorities requisi-
tioned all the factory buildings, etc., under R. 79 of 
the Defence of India Rules. Possession was taken 
sometime between March 1 and March 8, 1942. The 
tea garden was, however, left in the possession of the 
appellants. The possession of the military continued 
till the year 1945, and though the appellants looked 
after their tea garden, the manufacture of tea was 
completely stopped. Under the Defence of India 
Rules, the Military authorities paid compensation. 
For the year 1944, corresponding to the assessment 
year, 1945-1946, they paid a total sum of Rs. 2,22,080 
as compensation including a sum of Rs. 10,000 for 
repairs to quarters for labourers and Rs. 144 which 
represented the assessor's fee. 
For the year 1945, 
corresponding to the assessment, year, 1946-1947, the 
Military authorities paid a sum of Rs. 2,46, 794 which 
included a sum of Rs. 15,231 for other repairs. The 
sums paid for repairs appear to have been admitted 
as paid on capital account, and rightly so. 
The 
question was whether the two sums paid in the two 
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