Judgment

GROVER, J.:- This is an appeal by special leave from a judgment of the Bombay High Court answering the following question referred to it by the Income-tax Appellate Tribunal in the affirmative and against the assessee :

"Whether on the facts and circumstances of the case the receipt of Rs. 1,87,000 in the hands of the assessee is a revenue receipt and liable to income-tax ?"

The assessee used to carry on his business under the name and style of Milkhiram Bros. He was being assessed from the year 1945-46 onwards. On October 31, 1946 he secured a contract for the purchase of approximately 1,28,499 parachutes from Tata Aircraft Ltd. The parachutes belonged to the Government of India and the Tata Aircraft Ltd., was acting as the agent of the Government. The agreed purchase price of the parachutes was approximately 93 1/2 lakhs. The contract was entered into by means of letters. The assessee addressed a letter dated October 29,1946 to Tata Aircraft Ltd. containing an offer. Tata Aircraft Ltd. sent a reply dated November 1, 1946 confirming the sale on the terms and conditions given in that letter. The assessee had to make a deposit by way of earnest money of a sum of Rs. 10 lakhs. The assessee did not have enough funds with him. He entered into an arrangement with M/s. Nathmal Nihalchand, Pokhraj Hirachand and Harilal Hargovandas for financing the business. The details of this arrangement were contained in a letter dated October 31st, 1946. The amount of Rs. 10 lakhs was to be deposited by the latter who were to receive a "net profit share of 9 As. in a rupee". The assessee later on arranged on November 30, 1946 with the financiers to withdraw from the old arrangement recorded in the letter dated October 31, 1946. The benefits of the contract of purchase of parachutes were transferred to the firm styled as Pokhraj Hirachand for a sum of Rs. 3,00,000 on November 13, 1946. On November 14, 1946 the parties approached Tata Aircraft Ltd., who agreed to accept M/s. Pokhraj Hirachand as purchasers of parachutes on the terms and conditions originally agreed to between the assessee and that company. On November 22, 1946 an agreement of partnership was entered into between six persons, namely, Nathmal, Pokhraj, Chandumal, Prithviraj, Shapoorji & Co. Ltd., and Jamalbhai. This partnership took over the contract of purchase entered into by Pokhraj Hirachand. It was registered by the Income-tax authorities for the assessment year 1948-49.

2. M/s. Pokhraj Hirachand in their assessment claimed a deduction of Rs. 3,00,000 being the payment made to the assessee under the arrangement mentioned above. The Income-tax authorities disallowed the claim on the ground that it was a capital payment. The aforesaid firm appealed to the Tribunal which held that only a payment of Rs. 1,87,000 had been proved to have been made to the assessee. For the assessment year 1947-48 the Income-tax Officer reopened the assessment of the assessee under Section 34 of the Income-tax Act, hereinafter called the "Act" on the ground that the income of Rs. 3,00,000 had escaped assessment. The assessee contended that only a sum of Rs. 1,87,000 had been received by him and not Rs. 3,00,000. The Tribunal decided that point in his favour in appeal after he had failed before the Appellate Assistant Commissioner. The assessee s contention before the Tribunal was that the nature of the receipt of Rs. 1,87,000 was capital and not revenue. According to him the amount received was in the nature of a premium for giving up his right to do business in parachutes. The Tribunal did not accede to his contention and held that the assessee had received profit in respect of a venture in the nature of trade. Thereupon the assessee moved the Tribunal and the question of law was referred.

3. The High Court entertained no doubt on the facts which had been found that the receipt of Rs. 1,87,000 was a trading receipt. This was so because the assessee was a businessman dealing in articles including