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

3. The assessee is a private limited Company (which will hereinafter be referred to as the company). It was functioning as the managing agents of 27 companies including M/s. Greaves Cotton and Co. Ltd. M/s. Greaves Cotton Co. Ltd., was incorporated as a private company in about 1922 and its managing agents was the firm styled Messrs Greaves Cotton and Co. The company acquired a large block of shares in the managing agency company. M/s. Greaves Cotton Co. released their managing agency rights in favour of the company on receiving Rs. 27.On May 8, 1950, the managed company viz. M/s, Greaves Cotton and Co. Ltd. was converted into a public company. There after the company was not entitled to any commission on sales etc., in view of the provisions of the Indian Companies Act, 1913 as amended in 1939. Hence a fresh agreement was entered into between the company and the managed company, on May 10, 1950, under which the company was entitled to an office allowance of Rs. 5,000 per month and a commission of 10 per cent, of the net profits. The new managing agency agreement was to subsist for a period of 20 years with effect from May 8, 1950. On February 28, 1951, the Directors of the managed company appointed ato enquire into the question whether the managing agency of the company should be terminated leaving the management of the managed company to the Board of Directors. Thereported on March 16, 1951 that the managing agency of the company should be terminated. On, March 17, 1951 the Board of Directors of the managed company approved the recommendations. An extraordinary General Meeting of the shareholders of the managed company approved the resolution of the Board of Directors on March 31, 1951. That meeting also recommended a payment of Rs. 18 lakhs to the company as compensation. That resolution was communicated to the company on April 3, 1951 and the latter accepted it on April 10, 1951.4. In the assessment for the assessment yearax Officer included a sum of Rs. 18 lakhs in the total income of the company. He took the view that the payment of 18 lakhs by the managed company was an advance remuneration and not a compensation on account of loss of employment. On appeal by the company the Appellate Assistant Commissioner differed from the view taken by theOfficer and held that the amount in question represented compensation received by the company for the termination of its managing agency. TheOfficer took the matter in appeal to the tribunal. On his behalf, two contentions were advanced before the tribunal viz (1) that the transactions leading to the termination of the managing agency were not genuine transactions but are mere manipulations and (2) that in view of the fact that as the company was managing agents of 27 managed companies, it must be held that the managing agencies were theof the company and the amount received as a result of the termination of one off the agencies must be considered as revenue receipt. The tribunal negatived both these contentions. It held that the transactions whereby the managing agency of the company was terminated were genuine and real business transactions. It further held that the managing agencies held by the company represented sources from which it received its income by way of commission and, therefore, the termination of managing agency would represent destruction of a source of income. As a consequence of those findings, the tribunal held that the receipt in question was a capital receipt and not a revenue receipt. The Tribunal declined to submit a statement to the High Court on the ground that its findings are findings of fact. But the High Court directed the tribunal to submit a statement with the followingon the facts and in the circumstances of the case, the sum of Rs. 18,00,000/paid to Messrs. Karamchand Thapar and Bros. (Private) Ltd., was a revenue receipt and as such assessable to

Reasoning: 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.