Income Tax Appellate Tribunal - Delhi
J.C. Chandiok vs Deputy Commissioner Of Income Tax on 25 February, 1999
Equivalent citations: [1999]69ITD75(DELHI), [1999]238ITR89(DELHI)
ORDER
M. K. Chaturvedi, J.M.
1. Under s. 254(3) of the IT Act, 1961 (hereinafter called the Act), the President of the Tribunal has constituted the present Bench and referred the following question :
"Whether the sum of Rs. 27,00,000 received by the appellant from his landlord for surrender of tenancy rights is exigible to tax ?"
2. The factual matrix of the case : The assessee is a Chartered Accountant. He was in possession of bungalow No. 3, Raj Niwas Marg, Civil Lines, Delhi, which was used for office-cum-residential purposes. Originally the bungalow was leased under a lease deed dt. 11th June, 1956. The duration of the lease was 11 months and 29 days. The lessee was restrained from sub-letting the bungalow or any part thereof.
3. On expiry of the said period of lease, the landlord sought eviction of the appellant vide Misc. suit No. 57 of 1957 before the Sub-Judge. Vide order dt. 27th December, 1960, the suit of eviction was dismissed. It was held by the Sub-Judge that the tenancy was not for 11 months and 29 days because the landlord charged one year's rent in advance.
4. Being aggrieved of the order of Sub-Judge, landlord filed appeal before the Distt. Judge, who also dismissed the appeal vide order dt. 16th August, 1973. It was held, inter alia, that the ground for eviction did not exist, as the premises were not only let out for residential, but for official purposes also.
5. A Revision Petition was filed before the Hon'ble High Court of Delhi. The question in the revision petition was in relation to the computation of standard rent for the suit premises. In other words, it was accepted that the assessee will continue to use the premises as a tenant. The petition filed by the landlord was partly allowed vide order dt. 9th December, 1977, in Civil Revision Petition No. 666 of 1973.
6. From 1977 to 1991, rent was accepted by the landlord. Thereafter on 21st May, 1990, an agreement for sale was prepared. Vide sale deed dt. 13th March, 1991, the property in question was transferred to M/s Remeshwar Sahai & Associates for a consideration of Rs. 48,70,000 subject to the existing tenancy. The tenancy of the assessee was duly attorned in favour of the purchaser.
7. Thereafter vide agreement dt. 30th April, 1991, the landlord agreed with the assessee that vacant possession of the premises shall be handed over to the former on a payment of Rs. 37,00,000. Ex Consequenti, assessee received Rs. 37,00,000 for the surrender of tenancy rights.
8. Before the AO the amount received was claimed as not exigible to tax. Reliance was placed on the decision rendered in the case of Bawa Shivcharan Singh vs. CIT (1984) 149 ITR 29 (Del) and CIT vs. Joy Ice Cream (P) Ltd. (1993) 201 ITR 894 (Kar). The decision cited were found by the AO to be on different facts. He, therefore, relying on the decision of the Allahabad High Court rendered in the case of CIT vs. Gulab Chand (1991) 192 ITR 495 (All) rejected the claim of the assessee and held that the receipt in question was of casual and non-recurring nature. Its assessability was determined with reference to the provisions of s. 10(3) of the Act. As such, the amount received on the surrender of tenancy right was made exigible to tax. The order of the AO was confirmed by the CIT(A).
9. Shri M. S. Syali, learned counsel for the assessee appeared before us. At the outset, it was vehemently contended that tenancy right is a capital asset. As such, it cannot be charged under any other head. Reference was made to the decision of the Hon'ble Delhi High Court rendered in the case of Bawa Shiv Charan Singh vs. CIT (supra) wherein it was held that "property" is a term of widest import and it signifies every possible interest which a person can acquire, hold and enjoy. On that basis it was argued that tenancy right is a capital asset. Its surrender would, therefore, result in the right being extinguished and would, therefore, amount to a transfer of a capital asset within the meaning of the IT Act, 1961. It was further submitted that when the interest of the lessor is parted with, the price paid therefor, would be premium or salami, but the periodical payments by the lessee for the continuous enjoyment of the benefits under the lease are in the nature of rent; the former is a capital receipt and the latter a revenue receipt. What distinguished rent from premium is that the latter represented money paid as price or a consideration for being let in possession. Our attention was also invited on the amendment made to s. 55(2)(a) by the Finance Act, 1994 w.e.f. 1st April, 1995. To buttress the point, Mr. Syali made reference to some precedents also.
10. According to Shri Syali, a month to month tenancy is not different from a yearly or other tenancy for the purpose of protection of rent control legislation. The assessee can be construed to be a tenant by holding over. His tenancy was acknowledged in the sale deed by the landlord itself. It was further stated that the tenancy was attorned by the original landlord in favour of the purchaser landlord.
11. Reference was also made to s. 2(24)(vi) of the Act. It was argued that capital receipt can be considered to be income only within the meaning of this section. Prior to its insertion it was not exigible to tax. Shri Syali stated that for the present income is not to be understood in its wider connotation enabling legislative exercise but in its strict sense within the ken of the IT Act. Referring to the history of taxation of the capital gains, Shri Syali stated that from the year 1922 to 1946 such receipts were beyond the ambit of the tax net. In the Budget Speech for 1947-48 the capital gains were made exigible to tax. Capital gain tax was abolished in 1948. It was again reintroduced in 1956. Reference made to 15 ITR (St) 10.
12. Adverting to s. 2(24)(i) Shri Syali stated that profit and gains do not widen the concept of income to include all accruals/receipts as income. It will be legally erroneous to submit that all receipts are taxable unless shown otherwise, rather the reverse is true. Onus to show that a receipt is income is on the Revenue.
13. Learned counsel took us through the provisions of the Delhi Rent Control Act to explain the meaning and purport of tenancy right. It was stated that the assessee was a tenant within the meaning of s. 2(1)(ii) of the Delhi Rent Control Act, 1958 (hereinafter called DRC Act) and not under s. 2(1)(iii) which provides for the right of a tenant upon inheritance by him. It was stated that Explns. (i) to (iii) specifically apply to tenancies under s. 2(1)(iii) and prescribe how and for how long the inheritance is to occur. The Explanation only restricts the right of inheritance in certain cases, but do not detract from the inheritability of the right.
Referring to the provisions of s. 5(3) of the Delhi Rent. Control Act, learned counsel submitted that it does not place any restriction on transfer of tenancy right. It recognised the same as acceptable. It only prohibits any consideration for transfer of such right. Sec. 48(1)(b) of the DRC Act provides for prosecution in case of contravention thereof.
14. The next plank of Shri Syali's argument was that the surrender of tenancy right is a "transfer" within the meaning of s. 2(47) of the Act. It was stated that reversion may not be construed to be "transfer", under the Transfer of Property Act as it denotes merger of a smaller into a larger interest, but, the definition of "transfer" as relevant for the purpose is given under the IT Act. Therefore, there is no need to refer to any other law in this connection. It was stated that right to sublet is not the only mode of transfer. It is only a shade thereof. Surrender to the landlord was stated to be species of transfer. It was stated that such transfers are not prohibited by statute or contract.
15. The issue relevant in the present appeal was decided by the Special Bench of the Tribunal in the case of Cadell Wvg. Mills Co. (P) Ltd. vs. Asstt. CIT (1995) 53 TTJ (Bom) 538 (SB) : (1995) 55 ITD 137 (Bom)(SB). Shri Syali submitted that this decision was rendered specifically with reference to the provisions of the Bombay Rents, Hotel Lodging House Rates Control Act, 1947. Sec. 12 thereof only entitled statutory tenant to continue to be in possession till standard rent or permitted increases are paid. Thus, in the case before the Bombay Special Bench a statutory tenant did not have an estate or interest capital of being transferred. This Special Bench in reaching the conclusion relied upon the decision in Anand Niwas (P) Ltd. vs. Anandji Kalyanji Pedhi AIR 1979 (SC) 144. The Supreme Court in Gian Devi Anand's case (supra) has held that under the Delhi Rent Control Act a tenant even after the determination of the tenancy continues to have an estate or interest in the tenanted premises and the tenancy rights both in respect of residential premises and commercial premises are heritable.
In view of the specific decision of the Hon'ble Supreme Court in Gian Devi Anand's case (supra) under the provisions of the Delhi Rent Control Act a tenant even after the determination of the tenancy continues to have an estate or interest in the tenanted premises. It was, therefore, argued that the decision of the Special Bench in Cadell's case (supra) is not applicable in the facts of the present case.
Further, it was stated that the decision in Cadell's case (supra) itself recognises that where transfer is possible the tenant has an interest in the tenancy. Such tenancy is the capital asset and consideration for which is not liable to tax in so far as it is in respect of category "A" tenants. It equally and fully applies to the case of the assessee.
16. Coming to the applicability of s. 10(3) of the Act. It was stated that it applies only to such casual and non-recurring income which are not chargeable under s. 45 of the Act. The use of the word "all receipts" in s. 10(3) cannot enlarge the scope of s. 10(3). Reliance was placed on the decision rendered in the case of Anand Bala Bhusan vs. CIT (1995) 83 Taxman 548 (All). It was stated that for casual and non-recurring receipts to be taxable under s. 10(3) receipt should have the inherent character of income. Capital receipt is not envisaged within its ambit. Sec. 10(3) cannot exist de hors a head of income providing for computation of income.
Shri Syali further relied on the decision of Universal Radiators vs. CIT (1993) 201 ITR 800 (SC) wherein it was held that "exigibility to tax is not the same as liability to pay tax. The former depends on a charge created by the Act and the latter on computation in accordance with the provisions in the Act and the Rules."
It was further contended that a receipt does not cease to be chargeable merely because the charge fails. The amount received on surrender of tenancy right is properly chargeable only under s. 45. However, since the cost of acquisition of the tenancy rights in Nil, the computation provisions fail and the receipt is not exigible to tax. If the receipt on surrender of tenancy is held as not chargeable to capital gains under s. 45 then it ceases to be income under s. 2(24(vi) as defined therein. Being not "income" s. 10(3) in any case does not apply.
17. Coming to the applicability of the decision rendered by the Hon'ble Allahabad High Court in Gulab Chand's case (supra), Shri Syali submitted that this decision is not a binding precedent because :-
(a) it is against the decision of jurisdictional High Court;
(b) the Karnataka High Court in CIT vs. Joy Ice Cream (P) Ltd. (supra) took a view contrary to the decision of the Allahabad High Court;
(c) the Calcutta High Court in the case of R. K. Roy (P) Ltd. vs. CIT (1995) 211 ITR 500 (Cal) specially dissented in writ jurisdiction for the view taken by the Allahabad High Court; and
(d) the Special Bench in Cadell's case (supra) has held the same as not applicable in cases where the tenant has an estate or interest in the tenanted premises.
18. Mrs. Prem Lata Bansal, Advocate, appeared on behalf of the Revenue. It was vehemently contended that the receipt on surrender of tenancy right is an income under s. 2(24) of the Act. Dealing with the concept of income, Mrs. Bansal, stated that the word "income" is of wide import. It includes within its ambit all kinds of receipts resulting in profit and gain or any kind of benefit; whether of the nature of capital or revenue. Its meaning cannot be abridged in any sense. The definition of "income" contained in s. 2(24) is inclusive and not exhaustive.
Reference was made to the decision of the apex Court rendered in the case of CIT vs. Kartikeyan (1993) 201 ITR 866 (SC) wherein it was held that even if a receipt did not fall within the ambit of any of the clauses enumerated in s. 2(24), it might still be an income if it partakes the nature and character of income. It was submitted that since the definition of income in s. 2(24) is an inclusive one, it ambit should be the same as that of the word "income" occuring in Entry 82 of List I of the 7th Schedule to the Constitution of India.
19. Mrs. Bansal submitted that receipt on surrender of tenancy right is a receipt of casual and non-recurring nature. The meaning of the word "casual" was explained. It means occurring or coming at uncertain times, not to be calculated on, uncertain, unsettled. Mrs. Bansal, took us through the facts of the present case. It was stated that the receipt of Rs. 37,00,000 was casual in nature. It occurred at uncertain time. It never had been anticipated by the assessee. It was not capable of being settled by the assessee in view of the provisions of s. 5(3) and s. 48(1)(b) of the DRC Act. Sec. 5(3) of the DRC Act prohibits the tenant from claiming or receiving any payment in consideration of relinquishment, transfer or assignment of his tenancy. Sec. 48(1)(b) of DRC Act prescribes penalty for contravention of the provisions of s. 5 of DRC Act.
20. Mrs. Bansal argued that the right of statutory tenant in property after the determination of the lease is not a capital asset within the meaning of s. 2(14) of the Act. It was submitted that the term "asset", and the "property" of any kind had not been defined in the Act. When the Act is silent, then the help may be taken for making interpretation of the word from the sister legislation. If the sister legislation is also silent, then the term may be interpreted, according to its natural meaning. Help may also be taken from the General Clauses Act. Reference was made to the decision of the Karnataka High Court rendered in the case of Shanker Construction Co. vs. CIT (1991) 189 ITR 463 (Kar) wherein it was held that if the Act is silent, first we have to see its meaning in the sister legislation, thereafter, we got to see the meaning in common parlance.
21. It was submitted that the term "asset" is defined in s. 2(e) of the WT Act. It excludes the interest of an assessee, in a property held for a period not exceeding 6 years from the definition of the "asset". Admittedly, the assessee is a statutory monthly tenant. Therefore, the right of the assessee cannot be construed to be "asset". Reference was also made to the provisions of s. 6(d) of the Transfer of Property Act, which prescribes as under :
"An interest in property restricted in its employment to the owner personally cannot be transferred by him."
On that basis it was argued that the assessee did not possess any transferable right in the property.
22. Next it was argued that the statutory tenancy is not transferable. It is only inheritable to a limited extent. Reference was made to s. 2L(ii) read along with Expln. I, II and III of the DRC Act. It was explained that the statutory tenant has limited right in the property. This right is of the nature of right in personam. Even the heirs of the statutory tenant can inherit the property only for a period of one year. On the expiry of this time the right of such successor comes to an end. It is, therefore, beyond the competence of a statutory tenant to alienate the property for consideration.
23. In regard to the decision of apex Court rendered in the case of Gian Devi vs. Jeevan Kumar AIR 1985 (SC) 96, it was submitted that the ratio decidendi of this case is not applicable in the facts and circumstances of the present case. This decision was rendered in relation to the statutory tenant of commercial premises only. This is a decision on inheritability and not on transferability.
24. Coming to the amended provision of s. 55(2) it was stated that it can be applied only in respect of tenancy rights which are capital assets within the meaning of s. 2(14). Therefore, even after the amendment, incorporated in the section w.e.f. 1st April, 1985, the statutory monthly tenancy without having any transferable right is not a capital asset. Reference was also made to the decision of the apex Court rendered in the case of C. B. Gautam vs. Union of India (1993) 199 ITR 530 (SC) wherein it was held that the protection of the Rent Control Act to the monthly tenant cannot be regarded as interest for which compensation is to be paid.
25. It was further argued that the surrender of tenancy right to the landlord amounts to reversion. The is beyond the ken of definition of "transfer" as given under the Transfer of Property Act. Surrender of tenancy right, is not the sale, exchange or relinquishment of the asset or the extinguishment of any right therein consequent upon the transfer. Therefore, surrender of tenancy right is not the transfer within the meaning of s. 2(47) of the Act. Discussing the decision of the Hon'ble Delhi High Court rendered in the case of Bawa Shiv Charan Singh (supra), Mrs. Bansal stated that it does not deal with statutory tenancy. Our attention was invited on the decision of the apex Court rendered in the case of CIT vs. B. C. Srinivasa Setty (1981) 128 ITR 294 (SC) wherein the apex Court has held at p. 299 of 128 ITR that a transaction to which the provisions cannot be applied must be regarded as never intended by s. 45 to be the subject of the charge. It was stated by the learned counsel that the charging section and the computation provisions are integrated. When there is a case to which the computation provisions cannot be applied at all, such a case is not intended to fall within the charging section. The asset must bear that qualify which bring s. 45 into play. In the self-created right, it is not possible to determine the date of acquisition of the asset. Therefore, it is outside the purview of s. 45. On this background, it was contended that the tenancy right, in respect of which the cost of acquisition is not discernible cannot be construed to be capital asset and if it is not capital asset, then the provision of s. 45 will not come into picture.
26. Mrs. Bansal relied on the decision of the Allahabad High Court rendered in the case of CIT vs. Gulab Chand (supra) wherein it was held that even if a receipt is of capital nature and capital gain is not chargeable under s. 45 as per the reasoning in B. C. Srinivasa Setty's case (supra), it must be held to be a receipt of casual and non-recurring nature within the meaning of s. 10(3). It was stated that the decisions of the Karnataka High Court in (1993) 201 ITR 894 (Kar) (supra) and Calcutta High Court in (1995) 211 ITR 500 (Cal) (supra) are not binding precedents. Mrs. Bansal also relied on the decision of the Special Bench rendered by the Tribunal in the case of Cadell Wvg. Mill Co. (P) Ltd. vs. Asstt. CIT (supra).
27. We have heard the rival submissions in the light of material placed before us and the precedents relied upon. First we need to consider the character of the right which the assessee had in the property. Right is a legally protected interest. The assessee was a tenant within the meaning of s. 2(1)(ii) of the DRC Act. In Gian Devi's case (supra) the apex Court considered the provisions of DRC Act and has held that a tenant even after the determination of tenancy continues to have an estate or interest in the tenanted premises. It transpires from the perusal of the DRC Act that in the Act, there exist no difference between the rights of a statutory tenant and a contractual tenant. Right to tenancy carry the attribute of an interest in property inasmuch as a tenant in possession, consequent upon the termination of his tenancy, continues to have right in the tenanted property and such right is heritable.
28. Long ago the great jurist, Bentham issued a warning that legal words demand a special method of elucidation and he enunciated a principle that is the beginning of wisdom in this matter though it is not the end. He said we must, never take the words alone, but consider the whole sentence in which the word play its characteristic role. Therefore, we must not take the word "right" alone but the sentence "right to tenancy".
29. By refusing to identify the meaning of the word "right" with any psychological or physical fact it correctly leaves open the question whether on any given occasion a tenant who has a right has in fact any expectation or power and so it leaves us free to treat tenants expectations and power to encash such right.
30. Right of a person in relation to his property in legal parlance known as proprietary right. The aggregate of a person's proprietary right constitutes his property. All the proprietary rights are not transferable. The editor of the 11th Edition of Salmond's book on Jurisprudence concludes (at p. 290) :
"The true test of proprietary right is not whether it can be alienated, but whether it is equivalent to money, though it cannot be sold for a price. A right to receive money or something which can itself be turned into money, is a proprietary right and is to be reckoned in the possessor's estate, even though inalienable."
31. Law is not an antique to be taken down, dusted, admired and put back on the shelf. It is rather like an old but vigorous tree, having its roots in history, yet continuously taking new grafts and putting out new sprouts and occasionally dropping dead woods. Broadly the controversy set out in the present appeal was silenced by the decision of the Special Bench rendered in the Cadell's case (supra). But in the present appeal, certain new points were raised. Both the parties placed reliance on the Cadell's case (supra). It was contended that Cadell's case (supra) is the milestone, but it should not be treated as the touchstone to decide the controversy raised in the present appeal. The facts of the Cadell's case (supra) were said to be different from that of the present case.
32. Each case depends on its own facts, and a close similarity between one case and another is not enough, because even a single significant detail may alter the entire aspect. In deciding such cases, one should avoid temptation as said by Cordozo, by matching the colour of one case against the colour of another.
33. In the case of Cadell Wvg. Mills Co. (P) Ltd. vs. Asst. CIT (supra), Tribunal decided the issue with reference to the provisions of the Bombay Rents, Hotel Lodging House Rates Control Act, 1947. The provisions of which are not in, pari materia, with the DRC Act. Sec. 12 of the Bombay Act entitled statutory tenant to continue to be in possession till standard rent or permitted increases are paid. Nothing further. Whereas under the DRC Act, rights of a statutory tenant were held to be heritable.
34. The conclusion of the Tribunal in Cadell's case that a statutory tenant did not have an estate or interest capable of being transferred was based on the ratio laid down by the apex Court in the case of Anand Niwas (P) Ltd. vs. Anandji Kalyani Pedhi (supra). In this case apex Court rendered the decision in the context of Bombay Act.
In the case of Gian Devi vs. Jeevan Kumar (supra), the Hon'ble Supreme Court has held that under the DRC Act a tenant even after the determination of the tenancy continues to have an estate or interest in the tenanted premises and tenancy right both in respect of residential premises and commercial premises. And such rights are heritable. Thus the facts of the present case are different from the Cadell's case (supra).
35. Even assuming that the principles laid down in the Cadell's case (supra) are applicable, it supports the stand taken by Shri Syali. It was held in the Cadell's case (supra) that where permission was granted to the tenant at any time by the landlord under the terms of the contractual tenancy or where any permission to sub-lease was obtained by the tenant from the landlord, the surrender of the tenancy rights even by statutory tenant is a valid transfer of a capital asset. In the present case the landlord while attorning the tenancy rights, vide letter dt. 28th May, 1990 had specifically agreed as under :
"You may not sublet the whole or any part of the premises except with one consent on terms that may be mutually agreed upon between us."
The agreement dt. 30th April, 1991, shows that the landlord had himself agreed with the assessee that vacant possession shall be handed over to the former on a payment of Rs. 37 lakhs. Thus, the surrender of tenancy right was made with the consent of landlord. We are, therefore, not making any departure from the ratio laid down in Cadell's case (supra). We concur with the reasons and conclusion on facts arrived in Cadell's case (supra).
36. It is true that s. 5(3) of the DRC Act prohibits the tenant from claiming or receiving any payment in consideration of relinquishment, transfer or assignment of his tenancy, and s. 48(1)(b) of the DRC Act implicates the penalty on the person in contravention of provision of s. 5 of DRC Act with simple imprisonment or with fine prescribed in the section. But when owner himself meets the expectations of the tenant how recourse could be made to the aforesaid prohibitory and punitive provision of the DRC Act. This amply demonstrates that the "right to possession" or in other words "right to restrain the real owner from the enjoyment of the possession of the premises" is indeed a valuable right. These sections cannot be held as placing any embargo, restriction or prohibition on surrender of tenancy rights to the owner of the premises.
37. Property is a term of widest import and it signifies every possible interest which a person can acquire, hold or enjoy. It refers to both tangible as well as intangible assets. It includes within its ambit those well recognised types of interests which have the insignia and characteristic of proprietary right. As there is no definition given to the word "property" in the Act, "property" must be construed in its plain and natural meaning subject to the context in which that expression occurs.
38. The word "transfer" is defined under s. 2(47) of the Act. According to the prescription of the said section, the word "transfer", in relation to capital asset also includes - The extinguishment of any rights therein. Surrender of tenancy rights in favour of the landlord tantamounts to extinguishment of possessory rights in favour of the landlord. As such it can be construed to be a transfer.
39. In order in overcome the judicial interpretation, rendered in the case of CIT vs. B. C. Srinivasa Setty (supra) the Finance Act, 1987, w.e.f. 1st April, 1988, has provided in s. 55(2)(a) that cost of acquisition in case of self-generated goodwill will be taken to the "Nil". For the purpose of bringing the capital gains arising from transfer of tenancy rights, etc. in the acquisition of which the assessee has not incurred any expenditure, the Finance Act, 1994, has amended the provisions relating to capital gains and provides that the cost of acquisition of tenancy rights, etc. is to be taken at Nil. This indicates that the legislature took the character of the tenancy right as that of a capital asset.
40. The Hon'ble Delhi High Court in the case of Bawa Shivcharan Singh (supra) has held that no capital gains tax is chargeable in respect of the transfer of tenancy right for the acquisition of which the assessee did not pay anything. In the case of Joy Ice Cream's (supra) Hon'ble Karnataka High Court has held that if a particular receipt is incapable of being computed as capital gain, the said receipt cannot be charged to tax as "capital gains". Hon'ble Gujarat High Court in the case of Rajbali Nazarali & Sons vs. CIT (1987) 163 ITR 7 (Guj) has held that the transfer of leasehold right which is protected by the provisions of the rent restriction statutes is nothing but a capital asset.
In the case of CIT vs. Arun Kumar Sen (1998) 231 ITR 945 (Del), it was held that if the cost of acquisition of tenancy right is "Nil", the amount received on its surrender is not exigible to capital gains tax. The question apropos its taxability as casual income was left open.
41. In the case of Universal Radiators (supra), it was held that exigibility to tax is not the same as liability to pay tax. The former depends on a charge created by the Act and the latter on computation in accordance with the provisions in the Act and the Rules.
42. Now the question is that whether the amount received on surrender of tenancy right can be made exigible to tax under s. 10(3) of the Act, as casual income. Sec. 10 does not tax an item which is capital per se. The title of the s. 10 is :
"Income not included in total income".
This heading is relevant in construing the purport of the section. We are reminded of the phrase :
"A rubro ad nigrim" - [from the red to the black].
Formerly the title of a statute was written in red while its body was written in black, and the phrase meant the process of interpreting a statute with reference to its title. In order to bring an item within the ambit of s. 10(3), it is a condition precedent that item must bear the character of income.
43. In the case of Anand Bala Bhusan vs. CIT (supra) it was held :
"The receipt of compensation was not of the nature of ordinary income and, therefore, the question of treating the same as a casual receipt for the purposes of income-tax did not arise."
The Hon'ble Allahabad High Court did not refer here the case of Gulab Chand (supra). But a different view was taken in the matter.
44. Income is an ordinary word in the English language and, unless the context otherwise requires, it should be given its ordinary and natural meaning. Income-tax is tax on income but the word income is a dark cat. in the bag of the income-tax code. There is no exhaustive definition of the word income. The word income in the Act is formidably wide and vague in its scope. It is a word of classic import. All receipts by an assessee cannot necessarily be deemed to be income of the assessee for the purpose of income-tax. The question whether a particular receipt is income or not depends on the nature of the receipt and the true scope and effect of the relevant taxing provision. The AO cannot assess any receipts by using the panoply of s. 10(3). He can assess only those receipts that amount to "income". The taxability of an amount would depend on the nature and character of the receipt.
45. We have taken into consideration the entire conspectus of the case. From the aforesaid discussion it is apparent that the amount received in question was of the nature of a "capital receipt". It could have been charged to tax only under the head "capital gains". But the chargeability failed, because of the apex Court decision in the case of CIT vs. B. C. Srinivasa Setty (supra). The amendment made to s. 55(2) of the Act was only prospective in operation. It was not made retrospective. Sec. 10 does not tax an item which is capital per se. Therefore, the receipt in question cannot be put within the ken of s. 10(3).
46. Having regard to the facts and circumstances of the case and after carefully considering the precedents relied upon, we are of the opinion that the sum of Rs. 37,00,000 received by the appellant from his landlord for surrender of tenancy right is not exigible to tax.
47. As regards the cases of the interveners, we have not examined the facts of those cases. The regular Bench while deciding these appeals may keep in view the principles laid down in this case.
48. In the result, appeal of the assessee, stands allowed.