The nature of a receipt is determined by its character in the hands of the receiver, and the specific facts of each case must be considered to adjudicate the nature of the receipt.

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 Versus Commissioner of Income-Tax, Ernakulam, 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 Commissioner of Income Tax, Gujarat Versus Saurashtra Cement Ltd., (2010) 11 SCC 84, wherein 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 Versus 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) vs. Clark, (1935) 3 ITR (Eng Cas) 17 (HL)]. That, however, is not to say that the question is one of fact