VEERASWAMI J. - These two references which relate to the assessment years 1952-53 and 1953-54, raise substantially the same questions as to the character of Rs. 15,000 that accrued to the assessee in each of the assessment years but recovered after a judgment of the Supreme Court was delivered on April 22, 1958. On May 22, 1950, the assessee entered into an agreement with one Solaiyappa Chettiar of Pallathur to purchase a tile factory with the name and style of Sivakami Tile Factory at Pudukkad in Kerala State for a total consideration of Rs. 90,003. He made an advance of Rs. 5,003 on that day to Solaiyappa Chettiar. The stipulation in the agreement was that the sale deed should be executed and registered on or before July 15, 1950, when a sum of Rs. 50,000 should be paid to the vendor, and for the balance of the consideration, the purchaser was to execute a mortgage of the properties to the vendor. The vendor having filed to execute a sale deed in favour of the assessee but conveyed the property to one Kotchu Wareed, the assessee was driven to a suit for specific performance of the agreement to sell. He got a decree as prayed for, which was, however, reversed by the High Court of Kerala. The assessee succeeded in his appeal to the Supreme Court, which restored the decree of the trial court and directed that there would be a decree for means profits against such of the respondents as might have been in possession of the property except during the period it was in the custody and management of the receiver appointed by the trial court. The assessee was declared to be entitled to the net sum collected by the receiver during his management. It is not disputed that during the two assessment years the receiver was in possession of the factory which he operate and that the sum of Rs. 15,000 for each of the assessment years received by him and deposited in court represented the profits derived from the factory. Kochu Wareed withdraw this amount as a result of the judgment of the Supreme Court, it was recovered from him by the assessee. The assessments of the assessee for the two years were re-opened under section 34 and the sum of Rs. 15,000 for each of the two years was included in his total income. The Income-tax Officer proceeded on the footing that the assessee was entitled to the mesne profits of Rs. 15,000 for each of the years as a result of the judgment of the Supreme Court. The objections of the assessee that the identical amount has suffered tax in the hands of Kotchu Wareed and that in any case the receipt was in the nature of damages and could not be regarded as income were overruled both by the revenue and the Tribunal. The Tribunals view was that when the Supreme Court awarded the manes profits it was on the basis that the assessee was holding the asset and derived the income therefrom. The Tribunal also considered that the assessee having actually included the amounts in his returns ought not to be allowed to go back upon the same. Whether the receipt was as damages the Tribunal did not express a specific opinion.
Two points are raised before us which are but a reiteration of the objections of the assessee before the lower authorities. So far as the argument based on double taxation is concerned, we do not think that there is any substance in it. The Supreme Court has held that he is the rightful owner of the factory entitled to the income therefrom during the two assessment years. It necessarily follows that the receipts for the two years made by the receiver were on behalf of the person who would be rightly entitled to them. The income, therefore, was that of the assessee and was liable to charge in his hands. He is not relieved of his liability, because the income was included in the assessment of person who would not be entitled to that income, and, therefore, not liable to tax thereon. Obviously, therefore, this is not a case of double taxation. It is not the case of the assessee that he has borne the tax which Kotchu Wareed has paid.
On the other point too we think the assessee must fail. The amounts deposited by the assessee can in no sense be regarded as damages. The possession of the receiver far from being wrongful was rightful. He was put in possession by order of court and he as receiver held possession of the factory on behalf of howsoever was rightly entitled to it as per the final decision of the civil courts. We have no hesitation in holding that the receipts by the receiver are not in the nature of damages.
Both the references are answered against the assessee, with costs, one set, Counsels fee Rs. 250.
We may add that, if the assessee has recovered or received any amount in any of the years from persons who have been in wrongful possession of the factory, the question whether such amounts as damages or mesne profits could be regarded as income chargeable to tax is a different matter on which we express no opinion in these references.