SAKTIJIT DEY, JUDICIAL MEMBER
AND RAMIT KOCHAR, ACCOUNTANT MEMBER

Uttamchand Bothra for the Appellant. Premanand J. for the Respondent.

ORDER

Saktijit Dey, Judicial Member – Aforesaid appeal of the assessee is directed against the order dated 9th July 2013, passed by the learned Commissioner (Appeals)– 18, Mumbai, for the assessment year 2010-11.

2. Ground nos.1 to 3 raised by the assessee are against addition of Rs. 51,84,000 under section 40(a)(ia) of the Income Tax Act, 1961 (for short “the Act”) for non–deduction of tax at source under section 194I of the Act.

3. Briefly stated the facts are, the assessee a company is engaged in the business as a builder / developer of real estate. As stated by the assessee, it is also engaged in carrying out SRA Projects (Slum rehabilitation), wherein it has to provide for free of cost flats to hut dwellers. For the assessment year under consideration, assessee filed its return of income on 30th September 2010, declaring loss of Rs. 2,46,555. In the course of assessment proceedings, the Assessing Officer found that assessee had debited to the Profit & Loss account an amount of Rs. 1,06,16,000 on account of compensation payment out of which on an amount of Rs. 51,84,000, assessee has not deducted any tax at source. On further verification, it was found by the Assessing Officer that the aforesaid amount of Rs. 51,84,000 was paid to 21 tenants on account of compensation. As the payment made to each individual was more than Rs. 1,20,000, the Assessing Officer called upon the assessee to explain why the payments made should not be disallowed under section 40(a)(ia). On account of non–deduction of tax at source. Objecting to the proposed disallowance, the assessee submitted that as the payment made is not rent, it will not come within the provisions of section 194I. The Assessing Officer, however, rejected such explanation of the assessee and referring to certain clauses of the letter dated 15th January 2007, issued by Brihan Mumbai Mahanagar Palika held that the compensation paid by the assessee to the tenants is actually rent, hence, provisions of section 194I are applicable. Accordingly, invoking the provisions of section 40(a)(ia) of the Act, the Assessing Officer disallowed amount of Rs. 51,84,000, alleging non–deduction of tax at source by the assessee. Being aggrieved of such disallowance, assessee preferred appeal before the learned Commissioner (Appeals) who also sustained the disallowance made by the Assessing Officer by endorsing the reasoning of the Assessing Officer.

4. Learned A.R. submitted before us, the land / property in question where the tenants were staying belonged to municipal corporation and the 100 odd inhabitants of the said building were actually the tenants of the municipal corporation. Learned counsel submitted, since the subject property where the tenants were staying was dilapidated and become dangerous to the life and property of inhabitant, a decision was taken by the authorities concerned to demolish the said building and build a new building under SRA project. As per the terms of development agreement between the assessee, who was entrusted to construct the building under the SRA Project, and the society constituted by the inhabitant of the building during the construction period, the assessee was required to provide alternative accommodation to the tenants as they have to vacate the building for the purpose of construction. However, as the assessee was not able to provide alternative accommodation to the tenants, he agreed to pay compensation to the tenants which got revised from time to time for enabling them to meet the expenditure to be incurred by them towards rent payable. Learned counsel referring to different clauses of development agreement submitted as there is no tenancy agreement between the assessee and the inhabitants of the property the payments made cannot be termed is “Rent” as per section 194I of the Act, hence, disallowance of expenditure under section 40(a)(ia) alleging non–deduction of tax at source is not valid. Learned counsel submitted, assessee is a developer who has been entrusted the work of constructing the building for the dwellers of old dilapidated building under the SRA Project. Therefore, the payments made by the assessee under the terms of the agreement being purely in the nature of compensation cannot be treated as rent as provided under section 194I of the Act. Learned counsel also relied upon the decision of the Tribunal, Mumbai Bench, in Jitendra Kumar Madan v/s ITO, [2012] 32 CCH 59 (Mum.) to impress upon the fact that similar compensation paid for alternative accommodation was treated as income from other sources at the hands of the recipients indicating thereby that the nature of such income is not rent.

5. Learned Departmental Representative, on the other hand, supporting the orders of the Departmental Authorities submitted, the assessee as per the terms of agreement was to provide alternative accommodation to the tenant. However, instead of providing such alternative accommodation, the assessee has made payments to the tenants towards rent to be paid by them for the alternative accommodation. Therefore, the payment made by the assessee being in the nature of rent will come within the purview of section 194I and the assessee having not deducted tax at source, disallowance under section 40(a)(ia) is justified. Learned Departmental Representative further submitted, for a particular payment to qualify as rent it is not necessary that the deductor should be the owner of the property.

6. We have considered the submissions of the parties and perused the material available on record. Undisputedly, the property in question where the tenants were staying earlier was owned by the Brihan Mumbai Mahanagar Palika and the tenants were paying rent to the Municipal Corporation. It is also a fact on record that the subject building having become old and in a dilapidated condition the authorities concerned decided to demolish the said building and construct a new building in its place under the SRA Project and the construction of the new building was entrusted to the assessee. It is also a fact that since the entire building had to be demolished for the purpose of constructing the new building, the tenants had to vacate the said premise and alternative accommodation was required to be provided to them. On a perusal of the agreement entered into between the assessee and the society formed by the tenants, it is relevant to note that since the assessee was not able to provide alternative accommodation to the tenants, it was provided under the agreement that assessee would pay them compensation towards expenditure to be incurred by them on account of rent payable by them for alternative accommodation and in accordance with such terms assessee initially paid compensation of Rs. 5,000 per month to each tenant which was subsequently revised from time–to–time as the assessee could not construct the building within the stipulated time period for various reasons. From the aforesaid facts, it is very clear that the concerned persons to whom the assessee had made the payment are neither tenants of the assessee nor the assessee has in reality paid rent on behalf of them. Only because the assessee was not able to provide alternative accommodation to these tenants the assessee had to pay compensation for enabling the tenants to meet the expenditure to be incurred by them towards rent payable whether they are actually paying rent or not. This is for the simple reason that tenants were displaced from the property where they were staying for construction of new building. On a perusal of section 194I of the Act, it is seen that under clause (i) rent has been defined as under:—

“Explanation.—For the purposes of this section, —

(i)

“rent” means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any,—

(a)		land; or
(b)		building (including factory building); or
(c)		land appurtenant to a building (including factory building);
		or
(d)		machinery; or
(e)		plant; or
(f)		equipment; or
(g)		furniture; or
(h)		fittings,

whether or not any or all of the above are owned by the payee;”

7. On a plain reading of the aforesaid definition of rent, it becomes clear that th. In any case of the matter, payments made by assessee under no circumstances can be construed to be coming within the meaning of “Rent” as provided under section 194I. Thus, after considering the totality of the facts and circumstances of the case, we are of the considered opinion that compensation paid by the assessee to the tenants towards alternative accommodation not being in the nature of rent as defined in section 194I, there is no requirement for deduction of tax under the said provisions. Therefore, the disallowance made under section 40(a)(ia) of the Act cannot be sustained. Consequently, we delete the addition made on that account. Grounds raised by the assessee are allowed.

8. In the result, appeal stands allowed.

SANJAY KAROL AND P.S. RANA, JJ.

Chythanaya K.K and Vijay Kumar Verma, Advs. for the Applicant. Vinay Kuthiala, Sr. Adv. and Ms. Vandana Kuthiala, Adv. for the Respondent.

JUDGMENT

 

Sanjay Karol, J. – The present appeal stands admitted on the following substantial questions of law:—

“Whether in the facts and circumstances of the case and in law, the ITAT was correct in holding that the compensation of Rs. 2,25,99,964 representing compensation received by the appellant towards cancellation of the SPA was a revenue receipt taxable in the hands of the appellant?”

2. In relation to the assessment year 2008-09, M/s RFCL Limited (hereinafter referred to as the assessee), filed return with the Income Tax Department. The case was selected for scrutiny through CASS and notices issued under the provisions of Sections 143(2) and 142(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act).

3. Vide order dated 28.12.2010 (Annexure P-1), the Assessing Officer, reassessed the income by disallowing (i) the depreciation of goodwill and (ii) claim of capital receipt. The order stood affirmed by the Commissioner of Income Tax (Appeals), Shimla, in terms of order dated 12.12.2011 (Annexure P-2). Findings of fact returned by such authorities, on the point in issue, came to be affirmed by the Income Tax Appellate Tribunal, Chandigarh Bench ‘B, Chandigarh, vide order dated 02.04.2013 (Annexure P-3).

4. In the instant appeal, we are only concerned with the second issue i.e. as to whether the amount of compensation so received by the assessee is required to be computed as a capital or a revenue receipt.

5. Facts already stand fully considered and appreciated by the authorities below. It is a settled position of law that the burden to establish as to whether the character of the amount received is revenue receipt or not, is always upon the revenue. However once it is so established, whether it comes under the clause of exemption or not is for the assessee to establish. Facts must be formed by the Tribunal and the High Court must proceed on the basis of such facts as may be determined by the Tribunal, for it is not the requirement of law that the High Court is to look into the facts afresh, overruling them, unless there is a question to that effect, challenging the facts formed by the Tribunal. [Dr. K.George Thomas v. CIT AIR 1986 SC 98].

6. Whether the receipt is capital or revenue in nature has to be adjudged on the basis of each case. There cannot be any straightjacket formula as has been so held by the Apex Court in CIT v. Saurashtra Cement Ltd. [2010] 192 Taxman 300wherein Court observed that:—

“14. The question whether a particular receipt is capital or revenue has frequently engaged the attention of the Courts but it has not been possible to lay down any single criterion as decisive in the determination of the question. Time and again, it has been reiterated that answer to the question must ultimately depend on the facts of a 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 conclusion.

15. In CIT v. Rai Bahadur Jairam Valji AIR 1959 SC 291, it was observed thus (AIR pp. 292-293, para 2:—

2. The question whether a receipt is capital or income has frequently come up for determination before the Courts. Various rules have been enunciated as furnishing a key to the solution of the question, but as often observed by the highest authorities, it is not possible to lay down any single test as infallible or any single criterion as decisive in the determination of the question, which 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. [Vide Van Den Berghs Ltd. (Inspector of Taxes) v. Clark (1935) 3 ITR (Eng Cas) 17 (HL)]. That, however, is not to say that the question is one of fact, for, as observed in Davies (Inspector of Taxes) v. Shell Company of China Ltd. (1952) 22 ITR Supp 1 (CA):

‘these questions between capital and income, trading profit or no trading profit, are questions which, though they may depend no doubt to a very great extent on the particular facts of each case, do involve a conclusion of law to be drawn from those facts.'” (Emphasis supplied)

7. Further in P.H. Divecha v. CIT AIR 1964 SC 758, the Apex Court held that:—

’12. In determining whether this payment amounts to a return for loss of a capital asset or is income, profits or gains liable to income-tax, one must have regard to the nature and quality of the payment. If the payment was not received to compensate for a loss of profits of business, the receipt in the hands of the appellant cannot properly be described as income, profits or gains as commonly understood. To constitute income, profits or gains, there must be a source from which the particular receipt has arisen, and a connection must exist between the quality of the receipt and the source. If the payment is by another person it must be found out why that payment has been made. It is not the motive of the person who pays that is relevant. More relevance attaches to the nature of the receipt in the hands of the person who receives it though in trying to find out the quality of the receipt one may have to examine the motive out of which the payment was made. It may also be stated as a general rule that the fact that the amount involved was large or that it was periodic in character have no decisive bearing upon the matter. A payment may even be described as “pay”, “remuneration”, etc., but that does not determine its quality, though the name by which it has been called may be relevant in determining its true nature, because this gives an indication of how the person who paid the money and the person who received it viewed it in the first instance. The periodicity of the payment does not make the payment a recurring income because periodicity may be the result of convenience and not necessarily the result of the establishment of a source expected to be productive over a certain period. These general principles have been settled firmly by this Court in a large number of cases. See, for example, Commr. of Income-tax v. Vazir Sultan & Sons 1959 Supp (2) SCR 375: (AIR 1959 SC 814), Godrej & Co. v. Commr. of Income-tax (1960) 1 SCR 527: (AIR 1959 SC 1352), Commr. of Income-tax v. Jairam Valji (1959) 35 ITR 148: (AIR 1959 SC 291), Senairam Doongarmall v.Commr. of Income Tax (1961) 42 ITR 392: (AIR 1961 SC 1579).’ (Emphasis supplied)

8. The Apex Court in Kettlewell Bullen & Co. Ltd. v. CIT AIR 1965 SC 65, has further held:—

’11. Whether, a particular receipt is capital or income from business, has frequently engaged the attention of the courts. It may be broadly stated that what is received for loss of capital is a capital receipt: what is received as profit in trading transaction is taxable income. But the difficulty arises in ascertaining whether what is received in a given case is compensation for loss of a source of income, or profit in a trading transaction.” … … … … … …

“21. But payment of compensation for loss of office is not always regarded as capital receipt. Where compensation is payable under the terms of the contract which is determined, payment is in the nature of revenue and therefore taxable.” … … … … … …

“36. … … …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 assessee’s income, the payment made to compensate for cancellation of the agency agreement is normally a capital receipt.”‘ (Emphasis supplied)

9. Also in Travancore Rubber & Tea Co. Ltd. v. CIT [2000] 3 SCC 715, the Apex Court observed that:—

’19. In determining whether compensation received for breach of a contract is a capital or trading receipt, the relevant rule has been formulated by Diplock L., J. in London and Thames Haven Oil Wharves Ltd. vs. Attwooll (Inspector of Taxes) (1968) 70 ITR 460, 488 (CA) as :

“Where, pursuant to a legal right, a trader receives from another person compensation for the trader’s failure to receive a sum of money which, if it had been received, would have been credited to the amount of profits (if any) arising in any year from the trade carried on by him at the time when the compensation is so received, the compensation is to be treated for income-tax purposes in the same way as that sum of money would have been treated if it had been received instead of the compensation.”‘

10. The apex Court in Gillanders Arbuthnot & Co. Ltd. v. CIT AIR 1965 SC 452, has held as under:

’11. We may now address ourselves to the question, whether compensation paid by the principal company for cancellation of the agency may be regarded as a capital or revenue receipt. We have in a recent case in Kettlewell Bullen and Co. v. CIT C.A. No. 226 of 1963 D/- 1-5-1964: (AIR 1965 SC 65) made a survey of the important cases which have arisen before the courts in the United Kingdom and an Indian in India about the principles which govern the determination of the nature of compensation received on the termination of an agency. We observed in that case:

“On an analysis of these cases which fall on two sides of the dividing line, a satisfactory measure of consistency in principle is disclosed 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 assessee’s income, the payment made to compensate for cancellation of the agency agreement is normally a capital receipt”.’

11. Applying the aforesaid principles to the given facts, which we clarify we are not reappreciating, we do not find any justification to interfere with the order passed by the authorities below, as by no stretch of imagination can it be said to be perverse, illegal or founded on incorrect or incomplete appreciation of provisions of law, much less facts.

12. Assessee is a Company duly registered under the Companies Act, 1961, having its office at 1201 to 1206, 12th Floor, Pinnacle Business Tower, Shooting Range Road, Surajkund, Faridabad – 121 009, Haryana. Its aim and object being diagnostic, laboratory solutions and chemical research.

13. M/s Sarabhai Zydus Animal Health Limited (hereinafter referred to as Zydus) was incorporated in the year 2000. The equity participation of the said company was in the following manner: (i) 50% with M/s Cadila Healthcare Limited (Cadila Group engaged in the business of Pharmaceuticals and Allied Industries – hereinafter referred to as Cadila) and (ii) 50% with: (a) Ambalal Sarabhai Enterprises Limited, a company incorporated under the Companies Act, 1956, having its registered office at Dr. Vikram Sarabhai Marg, Wadi Wadi, Vadodara 390 023; (b) Mautik Exim Limited, a company incorporated under the Companies Act, 1956, having its registered office at Shantisadan, Mirzapur Road, Ahmedabad; (c) Haryana Containers Limited, a company incorporated under the Companies Act, 1956, having its registered office at Dr. Vikram Sarabhai Marg, Wadi Wadi, Vadodara 390 023; and (d) Mr. Kartikeya v. Sarabhai, S/O Dr. Vikram Sarabhai, currently residing at Chidambaram, Usmanpura, Ahmedabad (hereinafter referred to as the Sellers).

14. It is the case of the assessee that the sellers had pledged their equity with Cadila, against a loan of Rs. 21,71,68,263/-. Also they were in debt to the company (Zydus).Vide Special Purchase Agreement dated 10.03.2007 (hereinafter referred to as SPA), the Sellers agreed to transfer their entire shareholdings (50% of Zydus) in favour of the assessee. This was for a valuable consideration of Rs. 72.5 crores. In terms of the SPA, a sum of Rs. 24, 81, 68, 263/- was paid as earnest money by the assessee. Undisputedly, as per inter se arrangement amongst the shareholders of Zydus, Cadila had a Right of First Refusal (hereinafter referred to as ROFR), which fact is evident from Clause-5 of the SPA.

15. SPA could be terminated in terms of Clause-7.6, which reads as under:—

“7.6 Termination of this Agreement

This Agreement shall not be terminable except in the manner specified herein and this shall continue to be valid and in force till it is terminated.

(i)		The Vendors shall not be entitled to terminate this Agreement on any grounds whatsoever.
(ii)		In the event the Condition Precedent (i.e. the due diligence) to Closing, as specified in Article 6 above, is not completed on or prior to the Closing Date, to the satisfaction of the Purchaser, then the Purchaser shall be entitled to forthwith terminate this Agreement by a written notice to the Vendors.
(iii)		In the event the Other Shareholder exercises its rights to purchase the Shares offered by the Vendors under its Right of First Refusal, on terms and conditions no more beneficial than the terms as set out in this Agreement, then the Purchaser shall forthwith terminate this Agreement by a written notice to the Vendors.
(iv)		In the event any litigation/proceedings is initiated which impacts the ability of the Parties to achieve Closing under this Agreement, then the Purchaser shall be entitled to forthwith terminate this Agreement by a written notice to the Vendors.” (Emphasis supplied)

16. Agreement contemplated consequence of termination in the following manner:—

“7.7 Consequences of termination:

(i) In the event of termination of this Agreement by the Purchaser, the Vendors shall repay the Earnest Deposit Amount and separately, pay a penalty equivalent to 25% annualized return on pro rata basis on the Earnest Deposit Amount or 5% of the Earnest Deposit Amount, whichever is higher, to the Purchaser, as follows:

(a)		where the Agreement is terminated in accordance with the provisions of Article 7.6(ii) above, then within 30 days of the date of such termination;
(b)		where the Agreement is terminated in accordance with the provisions of Article 7.6(iii) above, then within the 60-day period referred to in clause 14.2.2 of the shareholders agreement dated January 29, 2000 executed between the Other Shareholder and Ambalal Sarabhai Enterprises Limited (one of the Vendors herein) or the date on which the Other Shareholder purchases the Shares from the Vendors, pursuant to its Right of First Refusal, whichever is earlier;
(c)		where the Agreement is terminated in accordance with the provisions of Article 7.6(iv) above, then within 30 days of the date of such termination.

(ii) Upon the actions specified in Clauses 7.7 (i) above, being completed to the full satisfaction of the Purchaser, the Escrow Agent will release, upon receipt of a written intimation from the Purchaser in this respect, to the Vendors the duly executed blank share transfer forms and the original share certificates relating to the Shares deposited by the Vendors in the manner specified in Article 1.3(v) above.”

17. Vide another agreement of the same date, which is termed as a supplementary agreement, Sellers also agreed to convince Cadila to sell their entire shareholding i.e. balance 50% in Zydus, to the assessee. In terms thereof, assessee also deposited Rs. 15 crores with the Escrow Agent.

18. Vide communication dated 10.05.2007, the Sellers expressed their inability to sell their shares, conveying Cadila’s intention of purchasing the same by virtue and in exercise of their pre-existing contractual Rights of Refusal. Accordingly Sellers, categorically called upon the assessee to terminate the SPA and accept the following sums, in terms of Clause-7 of the SPA:—

(i) Earnest Deposit Amount:	Rs. 24,81,68,263.00
(ii) Interest:	Rs. 59,01,645.27
(iii) Penalty:	Rs. 1,24,08,413.15

19. There is nothing on record to establish as to what transpired thereafter, save and except that another supplementary agreement was executed on 22.05.2007 between the assessee and the Sellers, wherein the parties agreed to terminate the SPA by making payments to the assessee in the following manner:—

Sr.No.	Particulars of Payment	Amount
(i)	Repayment of Earnest Deposit Amount under the SPA	Rs. 24,81,68,263/-
(ii)	Interest for 63 days (i.e. 9 March 2007 to 10 May 2007 both days inclusive) on the amount specified in para (i) above, calculated @ 14% p.a.	Rs.59,96,833
	Less: TDS on interest @ 22.44% (One TDS certificate for interest upto 31.03.07 and another TDS certificate from 01.04.07 to 10.05.07 will be provided within 7 days)	Rs.13,45,689/
	Net Interest payable now	Rs. 46,51,144/-
(iii)	Payment of Penalty as per the SPA	Rs. 1,24,08,413/-
(iv)	Compensation for Termination of SPA	Rs. 2,25,91,587/-
	Aggregate amount payable	Rs. 28,78,19,407/-

20. This amount of Rs. 2,25,91,587/-, received as compensation by the assessee for termination of the SPA, was so claimed as a capital receipt, but assessed by the revenue as revenue receipt and subjected to payment of tax.

21. Now SPA provided for the consequences of the termination of the agreement and in terms thereof, assessee did receive the amounts towards payment of interest and penalty. Compensation for termination was nowhere in contemplation in the SPA. What was the basis for arriving such compensation remains a shrouded secret.

22. It has been rightly held by the authorities that Zydus was engaged in the business, similar to that of the assessee, who was exploring the possibility of expanding its business interests. Compensation is not on account of any injury to any of the capital assets of the assessee. The assessee, as is evident from the order dated 28.12.2010 (Annexure P-1) had also entered into business acquisition agreement with M/s Wipro and Godrej Industries Ltd. The assessee was pursuing strategic inorganic growth through acquisitions. Zydus was in the similar business as that of the assessee. The intent was not to purchase the shares of Zydus but takeover its business for expansion. As observed by Assessing Officer even the view of the statutory auditors was similar to that of the revenue.

23. Noticeably it is the assessee, who had terminated the SPA and not the Sellers and as such there was no breach thereof, necessitating payment of compensation to the assessee. The SPA was conditional and subject to approval by Cadila.

24. Even otherwise it is well settled legal position that in order to find out whether a receipt is a capital or revenue receipt, one has to see it in the hands of the receiver and in order to find out whether an expenditure is a capital or revenue expenditure, one has to see what it is in the hand of the payer. In the case of CIT v. Kamal Behari Lal Singha [1971] 3 SCC 540, the Apex Court has stated the legal position in the following words:

“4. It is now well settled that, in order to find out whether a receipt is a capital or revenue receipt, one has to see what it is in the hands of the receiver and not its nature in the hands of the payer. In other words, the nature of receipt is determined entirely by its character in the hands of the receiver and the source from which the payment is made has no bearing on the question. Where an amount is paid which, so far as the payer is concerned, is paid wholly or partly out of the capital, and the receiver receives it as income on his part, the entire receipt is taxable in the hands of the receiver. Therefore, the fact that the amount sought to be taxed in these appeals was capital gains in the hands of the company is not a relevant circumstance. What we have to see is what it was in the hands of the assessee.” … … …

25. If a receipt is a capital receipt in the hands of a recipient, it does not necessarily follow that expenditure is capital expenditure in the hand of a payer. Whether it is capital expenditure or revenue expenditure would have to be determined having regard to the nature of the transaction and other relevant factors. [Empire Jute Co. Ltd. v. CIT [1980] 4 SCC 25].

26. The assessee knew from the very beginning the conditionality Clause. He was conscious that no injury would be caused to his business in the event of SPA not being materialized and its non execution would in no manner impair its revenue.

27. In the aforesaid factual background, in our considered view, the authorities below have rightly held the amount of compensation to be a revenue receipt. Income earned from such sources was to be taxed as business income.

28. Now in the instant case as already observed, it is not the case of the assessee that his business had come to a halt or impaired the source of income. Hence applying the principle of law laid down in the decisions referred to herein supra(including Kettlewell Bullen), we see no reason to interfere with the orders passed by the authorities below.

29. Learned counsel for the parties have cited various decisions, which is only reflective of their industry. We have considered them and having minutely gone through the same, we do not find necessity of dealing with each one of them individually for they are based on given fact situation. In the decisions referred to by the learned counsel for the appellant, which do not find mention herein, it be only observed, that the courts were dealing with cases where there was termination of an agreement, bringing the business of the assessee to a halt or impairing income or source of income.

30. Hence for all the aforesaid reasons, it cannot be said that the authorities below, and more particularly the Tribunal erred in holding the amount of compensation received by the assessee as a revenue receipt taxable in the hands of the assessee. Substantial question of law is answered accordingly.

Present appeal stands disposed of accordingly, so also pending application(s), if any.

AJAY KUMAR MITTAL AND MS. ANITA CHAUDHRY, JJ.