These cross appeals by assessee and revenue are directed against order of Commissioner (Appeals)-X, New Delhi dated 23-1-1985 relating to assessment year 1983-84. 2. These appeals involve interesting issues. These issue arise from very interesting set of facts. Therefore, before setting out issues, we bring factual canvas of case into focus. 3. assessee is corporate body registered under Companies Act, 1956 under name of Delhi Tambaku & Udyog (P.) Ltd., 544, Lahori Gate, Delhi---110006. assessment year involved is 1983-84. Its previous year for assessment year under appeal covered period from 28-10-1981 to 15- 11-1982 because previous year was Diwali year. There is firm known as Brij Lal Mani Lal & Co. having its head office at Sagar in State of Madhya Pradesh constituted of five partners, namely: (1) Shri Babu Rao Pimplapure (2) Shri Madhukar Rao Pimplapure (3) Shri Gopal Rao Pimplapure (4) Shri Divender Kumar Kunjabhai Patel (5) Shri Narendra Kumar Kunjabhai Patel said firm was manufacturing bidies. said company had finalised commencement of business of manufacture and sale of 'bidies' in State of Madhya Pradesh with proposal of expanding its manufacturing activities in other States as well. said firm decided to discontinue its manufacturing activities completely. There was agreement between said firm and company on 23-9-1971. This appears at pages 36 to 39 of paper book. As per this agreement, said company agreed to manufacture 'bidies' of required specifications and sell same to said firm. However, company retained its exclusive right to manufacture bidies of its own with its own trade-mark, labels under its own trade name and to sell same to whomsoever and at whatsoever place, it may choose. It was also agreed that said firm, in such situation, shall have no concern, whatsoever, with any such transaction of said company. said company shall also be free to manufacture 'bidies' for any person, firm, or company and said firm shall not raise any objection therefor. 4. However, insofar as manufacture of bidies by said company for said firm was concerned, manufacturing was to be to specifications regarding shape, size, quality and standard laid down by firm. bidies so manufactured were to be wrapped in printed tissue paper bearing trade-mark, labels of said firm, which were to be supplied by firm as per needs. manufactured bidies were to be delivered by company in fit condition for sale in market at such centre or centres as may be mutually agreed upon and after delivery had been effected in such manner, liability of said company in respect of goods shall cease. It was also provided that company shall make purchases of its own raw materials at its own discretion and in case 'tendu leaves' were supplied by said firm to company, they were to be used exclusively for manufacture of bidies for sale to said firm. company undertook not to use labels and printed tissue paper on any other bidies other than those manufactured for firm. 5. price of bidies so manufactured and supplied by company to said firm was to be determined from time to time on mutual consent taking into consideration all relevant factors governing manufacturing cost prevalent i n trade. However, it was provided that in no circumstances, such price of bidies shall be more than amount equivalent to manufacturing cost plus 10 per cent gross profit thereon. If there was any dispute, it was to be referred to sole arbitrator to be mutually appointed. It was open to either of parties to this agreement to terminate agreement after giving two months' notice. However, if parties agreed to terminate this agreement without such notice, notice period will not apply. 6. Under above agreement, company manufactured and sold bidies to firm in accordance with terms of agreement. 7. On 11-9-1981, company and firm entered into another agreement. In this agreement, it was recorded that said firm had now decided to carry on its own manufacturing of bidies and, therefore, informed company of its intent to terminate agreement dated 23-9-1971 referred to above. parties mutually agreed to terminate agreement. company, i.e., assessee agreed to sell to said firm and said firm agreed to purchase, bidies manufacturing business of company as going concern from date of this agreement. business was to be purchased by said firm, i.e., vendees from company, i.e., assessee-vendor together with all assets and liabilities of said bidi manufacturing business. It was agreed that bidi manufacturing business of vendor shall be purchased as going concern as on 15-12-1981. vendor had to prepare separate balance sheet of its bidi manufacturing business as on 15-12-1981 showing all assets and liabilities of bidi manufacturing business of vendor. It was provided that assets of business shall also include goodwill, benefit of all subsisting contracts, books of account of reference to consumers and other books and documents, trade-marks, etc. As consideration for purchase of bidi manufacturing business as going concern, with its assets and liabilities, firm, i.e., V.M. & Co. was to pay to assessee as 'slump price' of Rs. 5 lakhs. vendees also agreed that all employees of vendor engaged in manufacture of bidi for firm shall become employees of V.M. & Co., i.e., vendee-firm with effect from 15-12-1981 and they shall be deemed to be employees of said firm with effect from that date without any interruption or break in service. 8. When balance sheet of assessee-company as vendors of said business of bidi manufacturing as going concern was prepared on 15-12- 1981, assets exceeded liabilities by Rs. 51,473.41. Since slump price was fixed at Rs. 5 lakhs, vendee-firm of Sagar paid to assessee vendor, excess of Rs. 51,473.41 as additional amount. When assessee-company filed return for year under appeal on 24-6-1983 declaring income of Rs. 2,31,932 process of assessment for year under appeal started with issuance of notice under section 143(2) of Income-tax Act, 1961 ('the Act') by IAC (Assessment). IAC (Assessment) examined facts of case and provisions of two agreements referred to supra. According to him, it was apparent from agreements that assessee-company had been holding agency for manufacturing bidies for registered firm of V.M. & Co., Sagar and sum of Rs. 5 lakhs was received by assessee-company on termination of this agency. To come to this view, learned IAC (Assessment) relied upon certain judgments noted in his impugned assessment order dated 19-7-1984 made under section 143(3). 9. In alternative, IAC (Assessment) held view that Rs. 5 lakhs had been paid to assessee-company by firm, 'for termination of contract entered into by assessee-company in ordinary course of its business'. assessee-company had been manufacturing chemicals at its Bombay branch. According to IAC (Assessment), when this contract was terminated o n 11-12-1981, and sum of Rs. 5 lakhs was paid to assessee, payment was taxable as revenue receipt. Thus, in nutshell, IAC first held that receipt of Rs. 5 lakhs as slump price by assessee for sale of going manufacturing concern was taxable under section 28(ii)(c) of Act and in alternative, it was revenue receipt being payment for termination of contract entered into in ordinary course of business. amount of Rs. 5 lakhs was thus included in total income of assessee. 10. assessee-company had entered into agreement with Maharashtra Industrial Development Corpn., Corpn. constituted under Maharashtra Industrial Development Act, 1961, on 18-10-1976. This agreement appears at pages 50 to 79 of paper book. Under this agreement, assessee-company was granted licence under clause (1) only to enter upon piece of land described in First Schedule to this agreement for purpose of building and executing works thereon as provided in this agreement and for no other purpose, whatsoever. However, after terms and conditions of this agreement were fulfilled, assessee was entitled to lease of said premises. Clause (2) of this agreement provided that nothing in these presents contained shall be construed as demise in law of said land hereby agreed to be demised or any part thereof so as to give to licensee any legal interest therein until lease hereby contemplated shall be executed and registered. Stipulations to be fulfilled by assessee licensee were recorded. Sub-clause (m) of agreement provided that assessee will not directly or indirectly (m) of agreement provided that assessee will not directly or indirectly transfer, assign, sell, encumber or part with its interest benefits of this agreement or any part thereof, in any manner, whatsoever, without previous consent in writing of Chief Executive Officer. Chief Executive Officer had discretion to refuse such consent or to grant such consent subject to such conditions including condition for payment of additional premium as he may in his absolute discretion think fit. Clause (7) of this agreement provided that after factory building and works have been erected in accordance with terms of agreement and licensee had observed all stipulations and conditions, Executive Officer had to issue certificate and thereafter grantor, i.e., Maharashtra Industrial Development Corpn. will grant and licensee, i.e., assessee-company will accept lease of said land and factory building. This lease had to be executed by parties in duplicate. 11. factory building was completed in end of 1978. assessee before getting lease from Maharashtra Industrial Development Corpn. decided t o sell this factory, land and building at Taloja to D.K. Foods & Chemicals (P.) Ltd. as per agreement dated 15-10-1981 for consideration of Rs. 8,50,000. D.K. Foods & Chemicals (P.) Ltd. made payments of Rs. 8,50,000 through different cheques. However, as pointed out supra, assessee was merely licensee so far of said premises including factory buildings thereon and had not yet obtained leasehold rights from Maharashtra Industrial Development Corpn. Therefore, as provided in agreement dated 18-10-1976, transfer could not take place without previous consent in writing of Chief Executive Officer as per clause (1) of agreement. Maharashtra Industrial Development Corpn. required transfer fee of Rs. 1,39,800. On payment of this fee tripartite agreement was made on 18-1-1982 and assessee-licensee was allowed to transfer premises to D.K. Foods & Chemicals (P.) Ltd. 12. In assessment for year under appeal, in profits and loss account of Bombay branch office, assessee declared loss of Rs. 50,362 on this sale. assessee also claimed transfer fee of Rs. 1,39,800 paid to Maharashtra Industrial Development Corpn. for granting permission to sell this land and factory building by assessee. Thus, assessee in effect claimed loss of Rs. 1,90,162 on this transaction. 13. IAC (Assessment) held view that transaction of sale had not been completed as final sale deed had not been executed/registered during previous year relevant to assessment year under appeal. learned IAC has also recorded that assessee projected to him that D.K. Foods & Chemicals (P.) Ltd. stopped payment of Rs. 50,000 of last cheque dated 23-3-1982 on plea that assessee-company while removing machineries and plants from factory building had damaged building extensively. Since, according to learned IAC, transaction was not complete during accounting period, loss of Rs. 1,90,162 was disallowed (Rs. 1,39,800 plus Rs. 50,362) because he was of opinion that it does not pertain to year under appeal. 14. This assessment was challenged in appeal before learned Commissioner (Appeals). learned Commissioner (Appeals) considered reasons given by IAC (Assessment) and submissions made before him by learned counsel for assessee. He gave finding that receipt of Rs. 5 lakhs by assessee-company is not in pursuance of termination of any agency granted by V.M. & Co. to assessee. learned Commissioner (Appeals) held that there was nothing to suggest that payment of Rs. 5 lakhs was for termination of agency. He, however, pointed out that, 'the judgments cited by learned IAC in his order are not at all relevant to issue under consideration, as those mainly relate to termination of managing agency agreement and payment of compensation therefor'. Insofar as alternative ground taken by IAC was concerned, learned Commissioner held that that was also not valid because agreement between parties was very basis of assessee's carrying on its bidi manufacturing business. Since, it was not one of several contracts entered into by assessee-company in ordinary course of business, compensation for termination of one such contract did not give rise to revenue receipt. Thus, both grounds taken by IAC (Assessment) for taxing sum of Rs. 5 lakhs were found as not sustainable. 15. However, learned Commissioner (Appeals) observed that this receipt would give rise to capital gains. He directed IAC (Assessment) to work out capital gains liable to tax in accordance with relevant provisions of law. 16. With regard to loss of Rs. 1,90,162 learned Commissioner (Appeals) held that claim of assessee that agreement was covered by provisions of section 17(2)(v) of Indian Registration Act, 1908 and as such, exempt from registration was not tenable because in case of assessee section 17(1)(b) is applicable and since there was no registration, transaction could not be said to be complete within previous year relevant to assessment year under appeal. He, thus, held that registration of documents was necessary and it was not done. He further held that document that was tendered for registration was one that was executed on 22-3-1982. transfer of assessee's right in land and building, by whatever name be called, held learned Commissioner (Appeals), would not have been completed before registration of document dated 22-3-1982. According to him, document had not been registered till date. He, therefore, rejected assessee's contention on this ground. 17. Now, assessee is in appeal before us on finding of learned Commissioner (Appeals) that receipt of Rs. 5 lakhs would give rise to capital gains. assessee is also aggrieved in learned Commissioner (Appeals)'s holding that assessee had acquired any rights and or interest in land as result of its agreement dated 18-10-1976 with Maharashtra Industrial Development Corpn. and that execution of documents transferring assessee's rights to D.K. Foods & Chemicals (P.) Ltd. required registration, which was not done during accounting period relevant to assessment year under appeal. 18. revenue, on other hand, in its appeal, is aggrieved with his order in holding that sum of Rs. 5 lakhs received by assessee-company represents capital gains and should be assessed as such and in not holding that receipt of Rs. 5 lakhs is taxable under section 28(ii)(c) as compensation for termination of agency of manufacturing bidies. In grounds of appeal as alternative it is also contended that learned Commissioner (Appeals) erred in not holding that under agreement dated 23-9-1971 contract for manufacture of bidies was entered into and receipt of Rs. 5 lakhs is revenue receipt representing payment for termination of contract entered into in ordinary course of business. 19. We have heard parties and carefully considered their rival submissions. From side of assessee, submissions before us were in way reiteration of contentions taken up before learned Commissioner (Appeals). These submissions were supported by two citations of Hon'ble Supreme Court in CIT v. West Coast Chemicals & Industries Ltd. [1962] 46 ITR 135 and CIT v. Mugneeram Bangur & Co. [1965] 57 ITR 299. In nutshell, it was argued on behalf of assessee that sum of Rs. 5 lakhs is receipt, which is neither capital nor revenue in character and as such should be held as not taxable being slump price for sale of going business of manufacturing bidies as whole. In regard to claim of loss, submissions were repeated and various provisions in agreements were projected to bring to our notice that what assessee under agreements with Maharashtra Industrial Development Corpn. had received was merely licence and not leasehold rights. assessee had obtained right to obtain lease and that right had been transferred. Such right was not right, title and interest of character of immovable property. transfer of it did not require any registration, as it was covered under section 17(2)(v). authorities below, therefore, erred in not accepting loss. Their orders be reversed on this ground as well. 20. revenue, on other hand, relying upon orders of authorities below submitted that there is no case for interference in them at instance of assessee as required. It was contended that learned Commissioner (Appeals), however, erred in holding that sum of Rs. 5 lakhs was in nature of capital gains. following judgments were relied upon to claim that it was payment of Rs. 5 lakhs for termination of agency and was taxable as revenue receipt under section 28(ii)(c)---CIT v. South India Pictures Ltd. [1956] 29 ITR 910 (SC) and J. R. Kimtee & Sons v. CIT [1978] 115 ITR 190 (AP). 21. We have given careful consideration to rival submissions. We first proceed to dispose of issue relating to sum of Rs. 5 lakhs. It is not in dispute that this sum arose out of slump transaction, in which business sold was going concern. This transaction has been interpreted by IAC as termination of agency of assessee by firm. There is no justification, whatsoever, for this conclusion. We have abstracted supra, salient terms of agreement entered into between assessee company and registered firm in 1971. This agreement clearly is one of type which is entered into on principal to principal basis. agreement shows that both parties tried to protect their commercial interests by incorporating into agreement provisions for this purpose. In this agreement, there is no provision, whatsoever, which could be interpreted as assessee acting as agency of firm for purpose of manufacture of bidies. system of accounting arrived at in which assessee could get maximum profit of 10 per cent was for mutual protection of business interests of parties. case law relied upon by learned IAC for holding this case as that of agency is, therefore, absolutely irrelevant. 22. learned Commissioner (Appeals), in our considered opinion, therefore, rightly held that IAC (Assessment) was wrong in coming to conclusion that it was case of termination of agency. We also endorse his view that case is also not one of termination of contract. In fact, this conclusion is embedded in our first decision to hold that transaction was between principal to principal on commercial basis. There was no material, whatsoever, with IAC (Assessment) to hold that payment of Rs. 5 lakhs was on account of termination of contract in ordinary course of business, because, in fact, it was sale of going business itself and assessee had not shown this type of transaction any time before. 23. Now, coming to concept of capital gains propounded by learned Commissioner (Appeals), we do not find any justification for it either on facts of case or law applicable thereto. earliest such case was Doughty v. Commissioner of Taxes [1927] AC 327. In that case two partners carrying on business in Newzealand as general merchants and drapers sold partnership business to limited company, in which they became only shareholders. sale was of entire assets, including goodwill, consideration being fully paid shares and agreement by company to discharge all liabilities. paid shares and agreement by company to discharge all liabilities. nominal value of shares being more than sum to credit of capital account of partnership, in its last balance sheet, new balance sheet was prepared showing larger value for stock-in-trade. Commissioner of Taxes treated increase in value so shown as profit on sale of stock-in-trade and assessed it for income-tax under Land and Income-tax Act, 1916 of Newzealand which imposed tax on all profits or gains derived from any business. 24. Privy Council decided case in favour of assessee holding that if transaction is to be treated as sale, there was no separate sale of stock and no valuation of stock as item forming part of aggregate, which was sold. In this connection, it was observed that income-tax being tax upon income, it is well established that sale of whole concern, which can be shown to be sale at profit as compared with price given for business or at which it stands in books does not give rise to profit taxable to income-tax. 25. Hon'ble Supreme Court in case of West Coast Chemicals & Industries Ltd.'s case observed upon Doughty's case that this case shows that where slump price is paid and no portion is attributable to stock-in-trade, it may not be possible to hold that there is profit other than what results from appreciation of capital. essence of matter, however, is not that extra amount has been gained by selling out or exchange but whether it can fairly be said that there was trading from which alone profits can arise in business. 26. In case of Mugneeram Bangur & Co., Hon'ble Supreme Court held by applying principles of Doughty's case and West Coast Chemicals & Industries Ltd.'s case, that in sale of whole concern with slump price no part could be attributable to any other assets and no part of price was taxable. 27. When we examine case before us in light of law so laid down by Hon'ble Supreme Court, we find that decision arrived at by learned Commissioner (Appeals) to hold that sum of Rs. 5 lakhs gave rise to capital gains was wholly erroneous because in slump transaction no such capital gain could arise because sale was of going concern and transaction was not in business. In view of ratio of decisions of Supreme Court in above cases, this decision of learned Commissioner (Appeals) on facts of case is clearly untenable. We reverse this decision and hold that Rs. 5 lakhs is sum received by assessee in slump transaction, i.e., sale of business as going concern and no part of this amount is taxable either as revenue receipt or as capital gains. In this view, first ground in appeal of assessee is allowed. Since all grounds in appeal of revenue pertain to this sum of Rs. 5 lakhs appeal of revenue stands dismissed. We would like to observe that contention of revenue that case is covered under section 28(ii)(c) is not at all tenable because case before us is not of termination of agency and as such, provisions sought to be applied are irrelevant. 28. This leaves us only with second substantive ground in appeal of assessee relating to loss of Rs. 1,90,162 claimed as short-term capital loss. On this we have given careful consideration to submissions made on various facts of issue by both sides. However, we think, it is not necessary to advert to provisions relating to registration in this regard. This is so because under agreement dated 18-10-1976, assessee was mere licensee. Maharashtra Industrial Development Corpn. was grantor of licence. rights of licencee were restricted in terms of this agreement. Sub-clause (1) of clause (3) of this agreement provided that licensee will not directly or indirectly transfer, assign, sell, encumber or part with its interests under or benefits of this agreement or any part thereof in any manner, whatsoever, without previous consent in writing of Chief Executive Officer. Now, this consent is incorporated in order made by Maharashtra Industrial Development Corpn. bearing No. MIDC/TLJ/G-17/L/679 dated 12-1-1982 appearing at page 80 of assessee's paper book. This order says that licensee in pursuance of sub-clause (1) of clause (3) of agreement dated 18- 10-1976 represented to Corporation for grant to them of consent for transfer and assignment of their interests under or benefit of said agreement in favour of D.K. Foods & Chemicals (P.) Ltd. Corporation after due consideration of said request of licensees decided to grant its consent to transfer by licensees of benefit of its interests under said agreement subject to certain conditions. One of conditions was that licensee shall pay to Corporation sum of Rs. 1,39,800 by way of additional premium. This premium was paid on 12-1-1982 itself. On 18-1-1982 there was tripartite agreement, between MIDC, assessee and D.K. Foods & Chemicals (P.) Ltd. It is only by this tripartite agreement that it was provided that this agreement is supplemental to principal agreement and principal agreement shall hereafter be construed as if grantor entered into principal agreement with parties of third part, i.e., D.K. Foods & Chemicals (P.) Ltd. and party of third part alone had agreed to observe and approve stipulations contained in principal agreement and payment of Rs. 1,39,800 paid to grantor by licensees as premium shall be considered as paid by party of third part. 29. It is clear that it is tripartite agreement that puts seal of finality on right of transfer of licensee's right and interest. It is common ground, as there is no controversion of facts recorded by learned Commissioner, that factory building, etc., regarding transfer of right to which short-term loss is claimed was built by end of 1978. transfer of rights to D.K. Foods and Chemicals (P.) Ltd. is thus permitted in January 1982. Thereafter, on 22-3- 1982, assigners, i.e., Delhi Tambaku Udyog (P.) Ltd. being assessee assigned and transferred unto assignees, i.e., D.K. Foods & Chemicals (P.) Ltd. all their rights, title and interests in said factory building and structure consisting of four sheds known as ABC, and D comprising of about 884 sq. mts. built up area more particularly described in second schedule to this agreement. Thus, it would be seen that conclusions arrived at by learned Commissioner (Appeals) that loss claimed by assessee was not within statutory period of 36 months, and as such, it was not short-term capital loss, is fully justified. 30. It may be noted that arguments relating to requirement of registration of right, title and interests of assessee by virtue of agreement dated 18-10-1976 depending upon whether it was right creating right in immovable property or otherwise, therefore, does not require determination as immovable property or otherwise, therefore, does not require determination as on facts, loss has arisen from sale of assets as claimed, which were built and sold after period of 36 months. On this ground, therefore, claim of assessee regarding sum of Rs. 1,90,162 was rightly rejected by learned Commissioner (Appeals). This ground of appeal of assessee, therefore, fails. 31. In view of what is stated above, appeal of revenue is dismissed and that of assessee is partly allowed. *** DELHI TAMBAKU AND UDYOG LIMITED v. INSPECTING ASSISTANT COMMISSIONER