B.C. Misra, J.
(1) The following questions of law have, under directions of the High Court dated 26th July, 1966, been referred to this Court for opinion under section 256(2) of the Income-tax Act, 1961, namely:-
'1. Whether on the facts and circumstances of the case the- Tribunal could hold that a sum of Rs. 30,000.00 being the face value of three hundred fully paid-up shares of Messrs. Delhi Gate Service Private Limited, was not capital but revenue receipt in the hands of the petitioner liable to tax ?
2.Even if it be held that the aforesaid amount represented revenue receipt, could the Tribunal in law hold that the entire face value of the shares constituted revenue receipt which was assessable to tax ?'
The facts giving rise to the questions, as given in the statement of case, are that the assessed negotiated with Caltex (India) Limited for appointment as Petrol Dealer for the service station erected by Caltex outside Delhi Gate. The dealership when secured was transferred to a private limited company named Delhi Gate Services (P) Limited and in consideration thereof the company allotted to the assessed 300 ordinary (non-transferable) shares as fully paid up valued at Rs. 30,000.00. The Income-Tax Officer called upon the assessed to clarify the nature of this receipt. The assessed was asked to file the correspondence he had with Messrs. Caltex (India) Limited in this regard which was not produced on the ground that it was with some Court. The Income-Tax Officer treated the sum of Rs. 30,000.00 representing the face value of the shares as remuneration for services rendered by the assessed in the matter of obtaining dealership for the limited company. Accordingly, this sum of Rs. 30,000.00 was treated as income in the hands of the assessed. The appeal of the assessed before the Appellate Assistant Commissioner as well as the Tribunal failed.
(2) The agreement between the assessed and the newly floated' company is Annexure''C' dated 26th June, 1953 which, has been relied upon by the Income-tax authorities as well as the Tribunal. The agreement recites that A. S. Bhargava has brought about the incorporation of the company with a view to sell and transfer all. properties, rights and benefits accrued or to accrue from the allotment to him of the petrol pump and service station at Delhi Gate, Delhi and the Directors had agreed to take over the said properties, rights and benefits and that the vendors do hereby sell and transfer all properties, rights and benefits as defined above to the aforesaid company for a consideration of Rs. 30,000.00 to be paid by the company by the allotment of 300 ordinary (non-transferable) shares of Rs. 100.00 each as fully paid up and the total face value of these fully paid up shares was Rs. 30,000.00 shall be deemed to be full consideration for relinquishing all rights and privileges attached to the petrol pumping station by the vendors in favor of the company.
(3) The facts established disclose that the assessed had obtained a dealership of the petrol pump to himself from the Caltex Company. The same was an allotment of a petrol pump and service station or in other words a license to run the same and constituted the capital of the assessed and it was not a trading asset. By the aforesaid agreement, the assessed transferred the said capital to the newly floated company for a consideration of shares worth Rs. 30,000.00. The consideration for transfer of the capital, thereforee, constituted capital and was not a revenue receipt as it has not been shown that the assessed had commenced the business or had acquired any trading assets or he had, after the allotment, been left with any vestige of business under the allotment, nor has it has been shown that it was the business of the assessed to obtain and transfer allotments of petrol pumps.
(4) The distinction between capital receipts and revenue receipts has been the subject-matter of considerable judicial authorities. The Supreme Court in Senairam Doongarmall v. Commissioner of Income-Tax : 42ITR392(SC) , after considering the case of Commissioner of Income-tax v. Shaw Wallace and Company, 59 I. A. 206 and a number of other authorities, came to the conclusion that where an assessed does not carry on business at all, the compensation that he receives cannot bear the character of profits of a business and as obeserved by the Judicial Committee in Shaw Wallaces and Company's case , the compensation which was not the product of a business or profit but some kind of solarium for not carrying on business was not revenue.
(5) The counsel for the assessed has relied upon a judgment of the High Court of Madras in Seshasavee Brothers Limited v. Commissioner of Income-Tax, Madras, : 42ITR568(Mad) , to show that the sale of a license from the Government of India for manufacture of Vanaspati products was not a trading receipt. We find great support in answering this reference from a recent authority of the Supreme Court in Commissioner of Income Tax, Punjab v. Prabhu Dayal C. A. 1693 of 1968 decided on 6th October 1971.
(6) The counsel for the Revenue has not seriously challenged this legal position. He has, however, relied upon Commissioner of Income-Tax, Nagpur v. Rai Bahadur Jairam Vclji and others. : 35ITR148(SC) , to show that there is a difference between a payment made as compensation for the termination of an agency contract and an amount paid as solarium for the cancellation of a contract entered into by a businessman in the ordinary course of business; in an agency contract, the actual business consists in the dealings between the principal and his customers, and the work of the agent is only to bring about that business while he himself does not do this business. In this authority, the Supreme Court observed that the agency may, thereforee, be viewed as the apparatus which leads to the business rather than the business itself and considered in this light the agency right could be held to be of the nature of a capital asset invested in business, but this could not be said of a contract entered into in the ordinary course of business where such a contract would itself be a part of the business. This authority does not assist the Revenue as obtaining this license was not the regular business of the assessed. In this decision, the Supreme Court also laid down that in the determination of the question whether a receipt is capital or income, it is not possible to lay down any single test as infallible or any single criterion as decisive . and the question must 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, but that, however, is not to say that the question is one of fact, for these questions between capital and income, trading profit or no trading profit, are questions which, though they may depend to a very great extent on the particular facts of each case, do involve a conclusion of law to be drawn from those facts.
(7) The learned counsel for the Revenue has strenuously submitted that the finding of the Tribunal was that the income in dispute had been received by the assessed as consideration for the services he had rendered to the newly floated company in acquiring the business of running a petrol pump and service station and as such it was a taxable receipt. The counsel has further argued on the basis of Commissioner of Income-Tax, West Bengal v. Calcutta Agency, Limited : 19ITR191(SC) , that the High Court does not possess a fact finding jurisdiction which is advisory and that the High Court is bound by the findings of fact recorded by the Tribunal. There is absolutely no dispute with the proposition of law contended on behalf of the Revenue that we would certainly be bound by the findings of fact. We are, however, unable to agree with the counsel that this is a finding of fact by the Tribunal. Firstly, there was absolutely no evidence before the Income-tax authorities or the Tribunal to show that the assessed had acted as an agent on behalf of the newly floated company to obtain for it the business of running a petrol pump and the Tribunal would ordinarily not return a finding of fact which is not supported by any evidence whatsoever, however flimsy it may be. Secondly, where the finding is recorded without any evidence, it would constitute an error of law and the finding would not be binding as has been held by the Supreme Court in Meenakshi Mills Case 0044/1956 : 1SCR691 and Indian Wooden Mill's Case : 51ITR291(SC) , and by this Court in Said-ud-Din v. Mahabir Singh and others : AIR1971Delhi240 . We are, however, of the view that what has been relied upon by the counsel for the Revenue is not a finding of fact recorded by the Tribunal but is a part of its conclusion in law. Paragraph 5 of the order of the Tribunal (Annexure 'D') which deals with this point is reproduced below:-
'ASregards the sum of Rs. 30,000.00 brought to tax in his hands as his income, it is not necessary to elaborate our reasoning. The material facts have been brought out in the orders of the income-tax authorities. We have also before us the agreement of 26th June, 1953 between Anand Swarup on the one hand and .the said limited concern on the other hand. That limited (Sic. So added:- company's directors consisted of) asscssee's father and his wife Suraj Rani. It is clear from these facts that assessed helped Caltex Company to get certain good position near Delhi Gate to set up its petrol pump. In return for it the said petrol company gave him the right to run a petrol pump and service station at Delhi Gate. To exploit that right the private company was floated by Anand Swarup and he received there from 300 shares of the face value of Rs. 100.00 each as fully paid. In our opinion, this is clearly the return received by the assessed for the services he rendered to the said company in acquiring business of running a petrol pump and service station and making it over for a consideration and it is a taxable receipt for 'income may be received not only in money but in money's worth as well.' '
(8) A perusal of the said paragraph shows that the Tribunal recorded the finding of fact that it was clear that the assessed helped the Caltex Company to get certain good position near Delhi Gate to set up its petrol pump and in return for it, the petrol company gave him the right to run a petrol pump and service station at Delhi Gate. This would suggest that the assessed had done some useful survice to the petrol company, but it is not the petrol company which gave him the impugned amount of Rs. 30,000.00. The Tribunal further stated that to exploit that right, a private company was floated by the assessed and he received there from 300 shares of the face value of Rs. 100.00 as fully paid. The finding of fact naturally stopped at this place. What follows is a conclusion of the Tribunal that this was clearly a taxable receipt as the return received by the assessed for the services he had rendered to the newly floated company in acquiring business of running a petrol pump and service station and making it over to it for consideration. In the reasoning adopted by the Tribunal, there is absolutely no premise for holding that the assessed had rendered this service to the newly floated company. The finding of fact was that he helped the petrol company to obtain a site and then he received consideration from the new company. That it was a taxable receipt by the assessed from the newly floated company which acquired the business of running a petrol pump was a conclusion of law which forms the subject-matter of the first question referred to us for decision and we are, thereforee, entitled to answer it.
(9) In the order of the Tribunal, there is a reference to the reasoning of the Income-Tax Officer which may, to complete the record, be also examined. The Income-Tax Officer in his order (Annexure 'A') after mentioning the facts of the case that he had asked the assessed to file the correspondence with the Caltex Company so that he may correctly know the whole background of deal stated that the same had not been filed and under the circumstances he had no alternative but. to hold the receipt of the shares as remuneration for the services rendered by the assessed in the matter of obtaining dealership for the newly floated company. Here again, there is neither any evidence to support the conclusion, nor is this a finding of fact, but it is only a legal conclusion drawn by the Income Tax Officer. The Tribunal in its order relied upon the agreement (Annexure 'C') which has been extracted by us above. The Tribunal has not recorded as a fact that it did not accept the agreement as correct or it desired to tear off its mask and had some reasons to determine some facts contrary to the tenor of the agreement. In View of the language of the agreement, it was incumbent on the Tribunal to give full legal effect to it and on its construction, it was not possible for the Tribunal to hold that it was not a case of transfer of his capital by the assesses to the newly floated company but was a case of remuneration for services rendered to the company. The facts given in the statement of case as extracted above by us also state that the dealership had been secured by the assessed himself and not for or on behalf of the newsly floated private company and that he had himself transferred it for a consideration. We, thereforee, do not feel pressed by the contention of the counsel for the Revenue that in answering this reference, we are transgressing any finding of fact recorded by the Tribunal.
(10) The last submission of the counsel for the Revenue was that this Court should tear the veil of incorporation of the new com- pany and hold that the assessed had acted as promotor of the company and although he legally could not constitute an agent of the company which had till then not been floated, there were money facets for compensating promotors and allotment of the shares was one of the methods for rewarding promotors for the services rendered. In the circumstances of this case, it is not necessary to accept the submission of the counsel to pierce through the veil of the incorporation of the company as on the facts given in the statement of the case, the newly floated private company had two directors, one of whom was the father of the assessed and the other was his wife. Even if the mask had been lifted, it would be impossible to find that the assessed had received remuneration from his father and wife for any service rendered allegedly. We have, thereforee, no doubt about the answer to be given to the first question. As a result, we answer the first question in the negative and hold that the amount in dispute was not a revenue receipt but it constituted capital in the hands of the petitioner and was not liable to tax.
(11) In view of our answer to the first question, the second question does not arise for consideration, but since it has been referred to us, we would answer the same in the negative. The Tribunal in deciding the point held that the fact that the company declared no dividend at any time and was running into losses was of no consequence and that the shares belonging to private company in which there were restrictions for transfer was again of no consequence and at any rate, no material had been placed, that because of those conditions, the value of this money's worth was nothing other than Rs. 30,000.00 at the time of its receipt. The Tribunal was right in its observation that it was well established that where income was not received in money but in money's worth, its value had to be determined with reference to the market conditions then prevailing at the time of the receipt of the money's worth. The Tribunal, thereforee, ought to have determined the market value of the shares at the time and it erred in arriving at the conclusion that the face value of the shares would constitute the revenue receipt. We answer the question accordingly. The assessed will have costs of this reference.