Case: M/s. Karam Chand Thapar &amp; Brothers (P) Ltd Vs. Commissioner of Income Tax (Central), Calcutta

the case as found by the tribunal, the sum of Rs. 18,00,000/paid to the company was a revenue receipt and as such assessable to income-tax.6. Curiously enough despite the fact that the question referred to the High Court for its opinion did not in any manner challenge the correctness of the facts found by the tribunal, the High Court proceeded to rexamine the material on record and reversed the findings of fact reached by the tribunal. It came to the conclusion that all the proceedings relating to the termination of the managing agency of the company were not genuine transactions. It further came to the conclusion that the managing agencies held by the company were its stock-in-trade and therefore the amount of 18 lakhs paid by managed company to the company must be considered as a revenue receipt.7. In our opinion, it was wholly impermissible for the High Court to disturb the findings of fact reached by the Tribunal. The tribunal was the final fact finding authority. The facts found by it could have been challenged only on certain recognised grounds. Neither the High Court nor this Court has jurisdiction to re-appreciate the material on record to find out whether the facts found by the tribunal are correct or not. The High Court should not have taken upon itself the responsibility to go into the question whether the findings of facts reached by the tribunal are correct. The only question that the High Court was called upon to determine was whether on the facts found by the tribunal, the receipt in question should not have been considered by the tribunal as revenue receipt.8. As held by this Court in Commissioner of Income-tax, Madras v. Chari and Chari Ltd., (1965) 57 ITR 400 = (AIR 1966 SC 54 ) that ordinarily compensation for loss of office or agency is regarded as a capital receipt, but this rule is subject to an exception that payment received even for termination of an agency agreement would be revenue and not capital in the case where the agency was one of many which the assessee held and its termination did not impair the profit-making structure of the assessee but was within the framework of the business, it being a necessary incident of the business that existing agencies may be terminated and fresh agencies may be taken. But it is for the Income-tax department to clearly establish that the case fell within the exception to the ordinary rule. In the present case according to the findings of the tribunal, the termination of the agency in question had resulted in the destruction of a source of income of the company. The tribunal had arrived at the conclusion that the managing agencies held by the company represented the sources from which it received its income by way of commission.9. In the determination of the question whether a receipt is capital or income, it is not possible to lay down any single test as infallible or any single criterion as decisive. The question must ultimately depend on the facts of the particular case, and the authorities bearing on the question are valuable only as indicating the matters that have to be taken into account in reaching a decision. That, however is not to say that the question is one of fact, for these questions between capital and income trading profit or no trading profit, are questions which, though they may depend to a very great extent on the particular facts of each case, do involve conclusion of law to be drawn from those facts- see Commr. of Income-tax, Nagpur v. Raj Bahadur Jairam Valji, (1959) 35 ITR 148 = (AIR 1959 SC 291 ); P. V. Divecha (deceased) and after him his legal Representatives v. Commr, of I. T., Bombay City, (1963) 48 ITR 222 = (AIR 1964 SC 758 ); Kettlewell Bullen and Co, Ltd. v. Commr, of I. T., Calcutta, (1964) 53 ITR 261 = (AIR 1965 SC 65 ); Gillanders Arbuthnot and Co. Ltd, v. Commr. of Income-tax, Calcutta, (1964) 53 ITR 283 = (AIR 1965 SC 452 ) and Commr, of Income-tax, Madras v. Best and Co. (P) Ltd., (1966) 60 ITR 11 = (AIR 1966 SC 1325 ).10. The question whether a particular income arising from the termination of one of the agencies of a multi-agency concern is a capital receipt or a revenue receipt or a undoubtedly a difficult question to be answered. The difficulty is inherent in the problem itself. Decisions on this question are numerous. But none of them has laid down a precise principle of universal application but various workable rules have been evolved for guidance. One of us speaking for the Court in Kettlewell Bullen Co.s case, (1964) 53 ITR 261 (AIR 1965 SC 65) (supra) has laid down the following guidelines for finding out the true nature of such a receipt. The relevant observations read thus:"Where, on a consideration of the circumstances, payment is made to compensate a person for cancellation of a contract which does not affect the trading structure of his business, nor deprive him of what in substance is his, source of income, termination of the contract being a normal incident of the business, and such cancellation leaves him free to carry on his trade (freed from the contract terminated) the receipt is revenue: where by the cancellation of an agency the trading structure of the assessee is impaired, or such cancellation results in loss of what may be regarded as the source of the assessees income, the payment made to compensate for cancellation of the agency agreement is normally a capital receipt".11. On applying these tests to the facts jound by the tribunal in this case, the receipt must be considered as a capital receipt.12. Before we part with this case we deem it necessary to observe that we would be indulging in judicial impropriety if we indulged in the rhetoric in which one of the learned judges in the High Court indulged in.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]7. In our opinion, it was wholly impermissible for the High Court to disturb the findings of fact reached by the Tribunal. The tribunal was the final fact finding authority. The facts found by it could have been challenged only on certain recognised grounds. Neither the High Court nor this Court has jurisdiction tothe material on record to find out whether the facts found by the tribunal are correct or not. The High Court should not have taken upon itself the responsibility to go into the question whether the findings of facts reached by the tribunal are correct. The only question that the High Court was called upon to determine was whether on the facts found by the tribunal, the receipt in question should not have been considered by the tribunal as revenuethe present case according to the findings of the tribunal, the termination of the agency in question had resulted in the destruction of a source of income of the company. The tribunal had arrived at the conclusion that the managing agencies held by the company represented the sources from which it received its income by way of commission.9. In the determination of the question whether a receipt is capital or income, it is not possible to lay down any single test as infallible or any single criterion as decisive. The question must ultimately depend on the facts of the particular case, and the authorities bearing on the question are valuable only as indicating the matters that have to be taken into account in reaching a decision. That, however is not to say that the question is one of fact, for these questions between capital and income trading profit or no trading profit, are questions which, though they may depend to a very great extent on the particular facts of each case, do involve conclusion of law to be drawn from those factssee Commr. ofNagpur v. Raj Bahadur Jairam Valji, (1959) 35 ITR 148   = (AIR 1959 SC 291  ); P. V. Divecha (deceased) and after him his legal Representatives v. Commr, of I. T., Bombay City, (1963) 48 ITR 222   = (AIR 1964 SC 758  ); Kettlewell Bullen and Co, Ltd. v. Commr, of I. T., Calcutta, (1964) 53 ITR 261   = (AIR 1965 SC 65  ); Gillanders Arbuthnot and Co. Ltd, v. Commr. ofCalcutta, (1964) 53 ITR 283   = (AIR 1965 SC 452  ) and Commr, ofMadras v. Best and Co. (P) Ltd., (1966) 60 ITR 11   = (AIR 1966 SC 1325  ).On applying these tests to the facts jound by the tribunal in this case, the receipt must be considered as a capital receipt.12. Before we part with this case we deem it necessary to observe that we would be indulging in judicial impropriety if we indulged in the rhetoric in which one of the learned judges in the High Court indulged in.