Judgment

Shah, J.-This appeal is filed against the judgment and order dated 8th September 1993 passed by the High Court of Calcutta in Income Tax Reference No. 91 of 1988. The Court allowed reference application and answered the following question referred to it in the negative and in favour of the Revenue:--

“Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in confirming the decision of the C.I.T. (Appeals) that the receipt of Rs. 29,47,500 by the assessee from the Receiver or the hotel in the course of assessee’s hotel operation business, is a capital receipt.”

2. The said question arose in the Income-Tax assessment of the asses­see-company for the year ending on 30th June, 1978 corresponding to the Assessment Year 1979-80 in the background of the fact that the assessee-company was operating, managing and administering many hotels belonging to others for a fee at several places, e.g. Cairo, Colombo, Kathmandu, Singapore, etc. As per the Memorandum of Association of the Company, it was authorised to run hotels on its own account and also to operate, manage and administer hotels belonging to others for a fee. In terms of an Agreement dated 2nd November, 1970, the Company agreed to operate the hotel known as Hotel Oberoi Imperial, Singapore for which the assessee-Company was to receive certain fee called Management Fee which was calculated on the basis of gross operating profits as provided under Article X of the Agreement; the Agreement was to run for an initial period of ten years; the assessee had option to ask for renewal of the said Agreement for two further periods of 10 years each by mutual agreement. Article XVIII of the said Agreement gave the assessee a right to exercise the option of purchasing the hotel in case his owners desire to transfer the same during the cur­rency of the Agreement. Thereafter on 14th September, 1975 a Supple­mentary Agreement was executed between the appellant and the Receiver of the Undertaking and the property of Imperial Securities Interna­tional Limited, which, inter alia, provided that on 6th day of September, 1975 Receiver was appointed of the Undertaking and property of ISI pursuant to the terms of the Debenture dated 7th day of Janu­ary, 1974 made between ISI on one part and Common Wealth Development Finance Company Limited on the other part. On the basis of the said appointment of Receiver, the Receiver executed the Supplemental Agree­ment in favour of the appellant which, inter alia, provides that:

“g. The Operator hereby undertakes and agrees with the Receiver as follows:

(a) that Article XVIII of the Principal Agreement shall hence­forth cease to have any force and effect;

(b) that the Receiver shall, subject to the provisions of clause 8 hereof, be at liberty at any time hereafter to sell or otherwise dispose of the said property at such period and on such terms as he may deem fit and shall not be under any obligation of procuring or requiring the purchaser thereof to enter into any agreement with the Operator for the purpose of operating and managing of Hotel or other­wise;

(c) that should the Receiver succeed in selling or disposing of the said property to any party, the Principal Agreement and this Agreement shall, upon completion of such sale as may then be made by the Receiver, terminate and cease to have any force and effect;

(d) that the Operator shall do execute and deliver all such acts, deeds, documents and instruments as may be necessary or reasona­bly required by the Receiver for the purpose of giving effect to the provisions of this clause.

10. For the consideration aforesaid the Receiver hereby agrees to pay to the Operator.

(a) ......

(b) simultaneously termination of the Principal Agreement and this Agree­ment-

(i) a sum of $ 250,000/- if the said property is sold for a sum of less than S $30,000,000- or