COMMISSIONER OF JNCOMF-TAX, M.P. BHOPAL Versus INDORE TVRE HOUSE, INDORE
ORDER
G.G. SOHANI, J .‑‑By this reference under section 256(1) Income‑tax Act, 1961 (the hereinafter referred to as the Act) the Income‑tax Appellate Tribunal, Indore Bench has referred the following question of law to this Court for its opinion:‑
"Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the sum of Rs.37,048 received by the assessee as compensation was not liable to tax as a revenue receipt during the assessment year 1975‑76"?
2. The material facts giving rise to this reference as set out in the statement of the case briefly are as follows:‑
The assesses is registered firm carrying on business in tyres. During the assessment year 1975‑76, the assesses received a compensation of Rs.37,048 from the State Government on account of acquisition of assessee a business premises. Before the I.T.O. the assessee claimed that the aforesaid amount of compensation was exempt from tax as that amount was paid on account of cessation of business of the assesses as its business premises were acquired. That contention was not upheld by the I.T.O. who held that the amount was a business receipt and hence chargeable to tax. On appeal the Commissioner of Income‑tax (Appeals) accepted the contention of the assessee and the appeal preferred by the assessee was allowed. Aggrieved by this order the Department preferred an appeal before the Tribunal. The Tribunal upheld the decision of the Commissioner of Income‑tax (Appeals) holding that the assessee was permanently dispossessed of business and hence was paid solatium. The Tribunal, therefore, dismissed the appeal. Hence at the instance of the department the Tribunal was referred the aforesaid question of law to this Court for its opinion.
3. A similar question was referred to the Court in Commissioner of Income‑tax M.P: v. M.B. Tyres 1962‑137 1 T R 295. A Division Bench of this Court held that profit arising out of business could be charged to income‑tax only if the business was carried on during the previous year and that compensation paid on account of cessation of business was not chargeable as it was, not the product of the business. The learned counsel for the parties conceded that in view of the finding of the Tribunal in this case it was not possible to distinguish this case from the case reported in (1982) 137 1 T R 295‑(supra). We see no reason to take a view different from that taken in (1982) 137 I T R 295 (supra). Our answer to the question referred to this Court is, therefore, in the affirmative and against the department. In the circumstances parties shall bear their own costs of this reference.
M. B. A Reference answered in affirmative.