Case: Senairam Doongarmall Vs. Commissioner Of Income-Tax, Assam

2. 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 requisitioned all the factory buildings, etc., under R. 79 of the Defence of India Rules.3. Possession was taken sometime between March land 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,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 assessors fee. For the year 1945, corresponding to the assessment year,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 years minus these admitted sums, or any portion thereof, were received on revenue or capital account.4. The assessments for the two years were made by differentOfficers. For the assessment year,ax Officer deducted from Rs. 2, 22, 080, a sum of Rs. 1, 05, 000 on account of admissible expenses. He then applied to the balance Rs. 1, 17, 080, R. 24 of the IndianRules, 1922, and brought to tax 40 per cent of that sum amounting to Rs. 46, 832. The assessment was made under s. 23(4). For the assessment year,the assessment was made under s. 23(3) of the Incometax Act.TheOfficer excluded the sum paid on account of repairs and treated the whole of the amount as income taxable under the provisions of theAct, after deduction of admissible expenditure. The appeals filed by the appellants to the Appellate Assistant Commissioner against both the assessments were unsuccessful. On further appeal, theAppellate Tribunal (Calcutta Bench) was divided in its opinion. The Judicial Member held that the receipts represented revenue but on account of "use and occupation" of the premises requisitioned. He, therefore, computed the not compensation attributable to such use and occupation at 20 per cent of the total receipts in both the years. He however, observed that if the receipts included income from the tea estate he would have been inclined to apply R. 24 in the same way as the firstOfficer. The Accountant Member was of the opinion that the appellants were liable to pay tax on 40 per cent of their receipts in both the years after deduction of the sums paid for repairs of buildings and the admissible expenditure. He accepted the estimate of expenditure for the account year, 1944, . at RE;. 1, 05, 000, and directed that the admissible expenditure for the succeeding year be determined and deducted before the application of R. 24.5. It appears that through some inadvertence these two orders which were not unanimous, were sent to the appellants and the Department. The Commissioner offiled an application under s. 66(1) for a reference, while the appellants filed an application under s. 35 for rectification of the orders, since many other matters in appeal were not considered at all. When these two applications came before the Tribunal, it was realised that the matter had to go to a third Member for settling the difference. The President then heard the appeal, and agreed with the Accountant Member. Though he expressed a doubt whether the appellants were entitled to the benefit of rr. 23 and 24, he did not give an opinion, because this point was not referred to him.The Tribunal then referred the case to the High Court of Assam on the following two questions: "(1). Whether the sums of Rs. 2, 12, 080 and RE;. 2 31, 563 paid by the Government to the assessee in 1945 and 1946 respectively (exclusive of the sums paid specifically for building repairs) were revenue receipts in the hands of the assessee comprising any element of income? (2). If so, whether the whole of the said sums less the expenses incurred by the assessee in tending the tea bushes constituted agricultural income in his hands exempt from tax under the IndianAct, 1922?" The reference was heard by Sarjoo Prasad, C.J., and Ram Labhaya, J., along with two writ petitions, which had also been filed. They delivered separate judgments, but concurred in their answers. The High Court answered both the questions against the appellants. The writ petitions were also dismissed.

Reasoning: From the admitted facts which have been summarised above, it is clear that the business of the appellants asrs had come to a stop. The word "business" is not defined exhaustively in theAct, but it has been held both by this Court and the Judicial Committee to denote an activity with the object of earning profit. To say that a business is being carried on, means no more than that profit is to be earned by a process of production. The business of arer is not merely to grow tea plants but to collect tea leaves and render them fit for sale. During the years in question, the appellants were tending their tea garden to preserve the plants, but this activity cannot be described as a continuation of the business, which had come to an end for the time being. It would have hardly made any difference to the carrying on of business, if, instead of the factories and buildings, the tea garden was requisitioned and occupied, because in that event also, the business Would have come to a standstill.This decision was approved by the Court of Appeal. Now, the case was one of loss of time during which the ships would have been usefully and profitably employed. It was argued in the Court of Appeal with the assistance of the Glenboig case ((1922) 12 T.C. 427), and it was suggested that the vessels, were `sterilised for the period of detention.This ruling was strongly relied upon by the Department as one which laid down a principle applicable here. We do not agree. The, payment there was made towards loss of profits of a going business, which business was not destroyed. As a source of income, the business was intact, and the business instead of being worked for the whole period, was worked for a period less by a few days and the profit of that period was made up. That may be true if one is going to determine standard profits of a particular period, because what is paid goes to profits in the period but is of no significance in a case like the present, where during the whole of the year no business at all was done nor profits made. This case also does not help to solve theAll these cases were decided again on their special facts. Though they involved examination of other decisions in search for the true principles, it cannot be said that they resulted in the discovery of any principle of universal application. To summarise them: South India Pictures case (1) was so decided because the money received was held to be in lieu of commission which would have been earned by the business which was still going, and the receipt was treated as the fruit of the business. The same reason was given in Jairam Valjis case ([1959] SUPP. 1 S.C.R. 110) and Shamshere Printing Press case ( [1960] 39 I.T.R. 90). In Vazir Sultans case ( [1959] SUPP. 2 S.C.R. 375), the compensation was held to replace loss of capital, and in Godrejs case ( [1960] 1 S. C.R. 527), the compensation was said not to have any relation to the likely income or profits but to loss of capital. Each case was thus decided on its facts.We have so far shown the true ratio of each case cited before us, and have tried to demonstrate that these cases do no more than stimulate the mind, but none can serve as a precedent, without advertence to its facts. The nature of the business, or the nature of the outlay or the nature of the receipt in each case was the decisive factor, or there was a combination of these factors. Each is thus an authority in the setting of its own facts.25. Before we deal with the facts of this case and attempt to answer the question on which there is so much to guide but nothing to bind, we will refer to two cases of the Judicial Committee, one of which isCommissioner v. Shaw Wallace & Co. , to which we have referred in another connection.The case is important, inasmuch as this analysis of income has been accepted by this Court and has been cited with the further remark made in Gopal Saran Narain Singh v. Income Tax Commissioner ((1935) L.R. 62 I.A. 207) that the words "profits and gains" used in the IndianAct do not restrict the meaning of the word "income" and the whole expression is income, writ large. From this case, it follows that the first consideration before, holding a receipt to be profits or gains of business within s. 10 of the IndianAct is to see if there was a business at all of which it could be said to be income.Though the payment in question was not made to fill a hole in the capital of the assessee, as in the Glenboig case ((1922) 12 T.C. 427), nor was it made to fill a hole in the profits of a going business as in Shamshere Printing Press case ([1960] 39 I.T.R. 90 ), it cannot be treated as partaking the character of profits because a business not having been done, no question of profits taxable under s. 10 arose. The Privy Council described such a payment as a solatium.30. It is not necessary to give it a name; it is sufficient to say that it was not profit of a business.31. Once it is held that this was not profit at all, it is clear that Rules 23 and 24 of the IndianRules could not apply, and there was no question of apportioning the amount, as laid down in R. 24. The whole of the amount received by the assessee was not assessable.32. It remains to consider whether the payment could be treated as income from property under s. 9 of theAct.33. That this was never the case of the Department is clear from the fact that the income was not processed under that section, and even the Judicial Member of the Tribunal, who entertained this opinion, did not express it as his decision in the case. This aspect of the matter not having been considered in the case before, we cannot express any opinion upon it.34. In our opinion, the answers to the two questions ought to have been: Question (1) no Question (2) does not arise.