Rajasthan H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the addition of Rs. 6,90,051, being the premium realised on the sale of import entitlements, during the previous year relevant to the asst. yr. 1967-68 ?

Counsel Appeared

S.K. Keshote, for the Assessee : R.N. Surolia, for the Revenue

BY THE COURT :

This reference under s. 256(1) of the IT Act, 1961, at the instance of the assessee is to answer the following questions of law, namely :

” 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the addition of Rs. 6,90,051, being the premium realised on the sale of import entitlements, during the previous year relevant to the asst. yr. 1967-68 ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the receipt of Rs. 6,90,051 was not of a casual nature ? “

2. The relevant assessment year is 1967-68. The assessee is a private limited company, carrying on the business of manufacture and sale of soapstone powder. For the previous year relevant to the asst. yr. 1967-68, the assessee filed the return on September 24, 1967, and therein showed a sum of Rs. 7,85,051 as casual income. Exemption from tax was claimed in respect of this amount shown as casual income. The assessee then filed a revised return on August 26, 1968, in which this amount of Rs. 7,85,051 was not disclosed. Later, the assessee, by its letter dated December 27, 1971, intimated to the ITO that out of Rs. 7,85,051, a sum of Rs. 95,000 only represented the assessee’s income which was liable to be taxed. The ITO gave an opportunity to the assessee to show cause why the balance amount of Rs. 6,90,051 be not added to the assessee’s income. The ITO rejected the assessee’s explanation that the amount of Rs. 6,90,051 came to it as a windfall and was casual income. Accordingly, the ITO added this amount also to the assessee’s income. The result was that the entire amount of Rs. 7,85,051 and not merely the amount of Rs. 95,000 as claimed by the assessee was treated as the income flowing from the assessee’s main business. The assessee’s appeal to the AAC and thereafter further appeal to the Tribunal were dismissed. Hence, this reference at the instance of the assessee.

3. The assessee’s contention before the Tribunal also was that this amount was in the nature of a windfall and a casual receipt and, therefore, it was not taxable. It was contended that the amount represented sale proceeds of the import entitlements received under an export promotion scheme, which was merely of a casual nature being a windfall. The finding of the Tribunal has been summarised as under : “Looking to the entire facts and the evidence on record, it would be clear that the premium received by the assessee was in the course of carrying on of the business and as a result of trading done by the assessee. In any view of the matter, the receipts in question arose from the business or the exercise of a profession, vocation or occupation. Thus, thelearned AAC was right in holding that the sum of Rs. 6,90,051 was income of the assessee in the year of account.”

4. In view of the clear finding of the Tribunal affirming that of the AAC that the receipts arose from the main business of the assessee, there can be no doubt that the amount cannot be treated as a mere windfall or casual income so as to be exempt from tax as claimed by the assessee. It is also significant that the entire amount of Rs. 7,85,051 is impressed with the same characteristic and there is no basis to treat merely a part of it, i.e., Rs. 95,000 alone, as income and to treat the remaining amount of Rs. 6,90,051 as a windfall or casual income as claimed by the assessee. There is no reasonable basis for division of the entire amount into these two parts and to treat merely Rs. 95,000 as income and the remaining amount as casual income as claimed by the assessee. We also find that in similar circumstances, the Allahabad High Court in Agra Chain Manufacturing Co. vs. CIT 1978 CTR (All) 415 : (1978) 114 ITR 840 (All) rejected the assessee’s contention that such an income was of a casual nature and, therefore, exempt from tax. The test indicated in CIT vs. Dr. K. George Thomas 1977 CTR (Ker) 165 : (1977) 108 ITR 1024 (Ker) by the Kerala High Court also indicates that such a receipt is not of a casual or non-recurring nature. No decision taking a contrary view has been cited before us.

5. Consequently, the reference is to be answered in the affirmative, against the assessee and in favour of the Revenue by holding that the Tribunal’s view on both these questions was justified.

No order as to costs.

[Citation : 173 ITR 431]