Per Deepak R. Shah, Accountant Member: This appeal by assessee is directed against order of learned Commissioner of Income-tax (Appeals)-I, New Delhi, dated 18-6-2004. 2. appellant is experienced and reputed developer engaged in business of construction of multi-storied buildings, commercial as well as residential etc. 3. first ground of appeal is against denial of deduction of Rs. 7,29,656 on account of write-off of 10 per cent of share issue expenses incurred during assessment year 1993-94. At time of hearing this ground was not pressed. For want of prosecution, this ground is dismissed. 4. next ground of appeal is against treatment of sum of Rs. 4.25 crores received as compensation from Delhi Cloth & General Mills Co. Ltd. pursuant to settlement agreement entered into between assessee herein and DCM Ltd. and Kailashnath Associates. It is claim of assessee that sum of Rs. 4.25 crores is capital receipt not chargeable to tax whereas Assessing Officer has held same as revenue receipt chargeable to tax. In return of income, amount was not claimed as capital receipt. However, claim was made in assessment proceedings to exclude same from taxable income. Assessing Officer did not consider request and no discussion in this regard is found in assessment order. 5. Before learned Commissioner it was contended that amount received is not to carry on similar project in vicinity of project abandoned. This being restrictive covenant to carry on trade, should be treated as capital receipt. learned Commissioner held that it was not absolute prohibition as with consent of DCM any project could be undertaken. Therefore, claim of appellant that cessation agreement was not in nature of trading transaction but was one by which appellant had parted with or extinguished one of its important source of income is not acceptable. 6. Brief facts of case are as under:- DCM owned 66.53 acres of land in Bara Hindu Rao, New Rohtak Road, Kishanganj, Delhi. agreement dated 17-7-1986 was entered into between DCM and Kailash Nath Associates (KNA), whereby KNA was to develop and construct multi-storied residential flats, flatted factories, shopping complex, schools etc., on vast area of 66.53 acres of land belonging to DCM. Pursuant to understanding between DCM and KNA to bring in Ansal Properties and Industries Ltd. Ansals/Appellant) as Associate Developer, agreement dated 24-11-1988 was entered into between DCM, KNA and Ansals. In terms of this agreement, both KNA and Ansals were to develop and construct for DCM project equally to extent of 50 per cent each and meet all costs and expenses in equal share. In consideration, both KNA and Ansals were entitled to specified percentage of residential complex and other saleable area. It was specifically agreed that subject to terms of agreement, KNA and Ansals shall have right to enter into contracts to book and sell their respective areas. By notice dated 24-6-1998, DCM unilaterally terminated agreement entered into with KNA and Ansals. Termination of agreement led to disputes amongst parties. Number of legal proceedings challenging termination of agreement dated 24-11-1988 were filed. settlement agreement dated 30-10-2000 was entered into between DCM, KNA and Ansals, whereby parties resolved their disputes, differences, claims and counter claims. In terms of settlement, KNA and Ansals agreed to abandon/cessation of all their rights, claims, interests and activities whatsoever there might have been under principal agreement, which stands annulled, in relation to 66.53 acres of land owned by DCM at Bara Hindu Rao, Rohtak Road and Kishanganj, New Rohtak Road, Delhi, or construction already raised or to be raised thereon. DCM has agreed to acquire all such rights, claims, interests etc., of KNA and Ansals. DCM shall hereafter take over from KNA and Ansals construction of flatted factory complex and residential group housing complex on said land hitherto carried on by KNA and Ansals under annulled principal agreement, and all assets, excluding security deposit, relating to project including any construction carried out at project site respectively belonging to KNA and Ansals. KNA and Ansals have further agreed that they shall not undertake without prior written consent of DCM similar project in vicinity of project for period of three years from date of signing of this agreement. In consideration of above, DCM has agreed to take over all liabilities/obligations of both KNA and Ansals respectively under provisional bookings made and/or arrangements/agreements entered into by them with their respective prospective buyers, as per particulars in Annexures 'C' and 'D' to settlement agreement, including amounts towards basic price and which amounts on execution of stand transferred to books of account of DCM and DCM is now in its books showing said amounts to credit of said prospective buyers. DCM undertakes with KNA and Ansals to pay, satisfy and fulfil all duties, liabilities, obligations, contracts and engagements of KNA and Ansals in relation to their respective prospective buyers as under said provisional bookings/agreements/arrangements made with them and to indemnify KNA and Ansals against all proceedings, claims, demands, damages and compensation in respect thereof and amounts towards basic price as aforesaid. DCM has further agreed to pay compensation for annulment of very rights of KNA and Ansals to carry on business of completing project under principal agreement and for being deprived of potential income which could have arisen from carrying on such business, sum of Rs. 6.75 crores to KNA, which is inclusive of refund of security deposit of Rs. 3.90 crores, and sum of Rs. 8.25 crores to Ansals, which is inclusive of refund of security deposit of Rs. 4 crores respectively. Thus apart from sum of Rs. 4.25 crores received as compensation which is subject-matter of present appeal, appellant earned surplus of Rs. 2,15,50,721 from project on its termination which has been separately assessed to tax and is not subject-matter of any dispute. 7. learned counsel for assessee Shri H. Mitter submitted that principal objection of CIT(A) that there was no absolute prohibition to undertake any project inasmuch as similar project could still be taken with written consent of DCM was frivolous and irrelevant. There was no condition imposing any obligation on DCM to grant written consent. term 'similar project' was also unambiguous and it meant any project involving construction of residential complex, flatted factories etc., as described in agreement. term vicinity as understood by parties was atleast radius of five kilometers of Bara Hindu Rao, which in itself is vast area. meaning of term of Bara Hindu Rao, which in itself is vast area. meaning of term 'vicinity' has been described in Concise Dictionary as 1. surrounding district, 2. nearness or closeness of place or relationship. Similarly, in Websters New Twentieth Century Dictionary (Unabridged), word 'vicinity' includes surrounding region. It is submitted that appellant did not undertake any project of similar nature within radius of even more than five kilometers. In real estate business, developer can take up projects at different locations in specified area. Since DCM was developing project in or near Bara Hindu Rao, New Rohtak Road, area, it would have been adversely affected had Ansals taken up any other similar project in that or surrounding area. DCM would not have been affected by Ansals' taking up similar projects at Greater Kailash, South Extension, Gurgaon, Noida etc. It was for this reason that agreement only refrained Ansals from not to take up any similar project in vicinity where DCM project proposed to come up. In context of business which appellant was carrying on as also purpose for which DCM insisted on and imposed restrictive covenant, it cannot be said that since Ansals was free to undertake projects in other areas, therefore, consideration was not towards refraining from undertaking business activity. restrictive covenant has another limb, i.e., that Ansals shall not take similar project. This again was necessitated on account of nature of business. Had Ansals developed theatre, shopping mall, educational institute etc., in Bara Hindu Rao area, same would have not adversely affected DCM's project. Therefore, expression 'similar project' was used so that Ansals may be able to construct/develop other projects having no adverse affect on business interest of DCM. He accordingly pleaded that amount received being towards restrictive convenience whereby appellant undertook to restrain from undertaking any similar project in vicinity of aforesaid project for period of three years, amount received should be treated as capital receipt and hence not chargeable to tax. For this purpose, he relied upon following decisions:- (i ) CIT v. Best & Co. (P.) Ltd. [1966] 60 ITR 11 (SC); (ii )Gillanders Arbuthnot & Co. Ltd. v. CIT [1964] 53 ITR 283 (SC); (iii )Hari Kailash & Co. v. CIT [1952] 22 ITR 195 (All.); (iv )Gomti Credits (P.) Ltd. v. Dy. CIT [2006] 100 TTJ (Delhi) 1132; (v )CIT v. Vazir Sultan & Sons [1959] 36 ITR 175 (SC). He further submitted that by Finance Act, 1997, it has been provided that with effect from 1-4-1988, cost of acquisition in case of transfer of right to manufacture/produce or process any article or thing shall be nil . In instruction F. No. 225/83/99-ITA-II, dated 17-3-1999, Board explaining issue as under:- 'Where capital asset transferred is in nature of right to manufacture, produce or process article or thing recourse to section 55(2) can be made only from assessment year 1998-99 in respect of consideration received for transfer thereof which includes extinguishment or curtailment of such right. In this connection, attention is invited to clause 19 of Memorandum explaining provisions of Finance Bill, 1997, wherein it has been pointed out that consideration received on extinguishment of such right is in nature of capital receipt and is not liable to tax under head 'Capital gains' up to assessment year 1997-98. It is clarified that even where such transfer, extinguishment or curtailment of such right is complete or in part, taxability of this consideration will remain unaffected i.e., same will not be taxable under head 'Capital gains' only up to assessment year 1997-98 and will become taxable from assessment year 1998-99 and subsequent year.' What is important to note is that curtailment need not be complete. Consideration for even part curtailment of right, it was clarified would be capital receipt. Hon'ble Delhi High Court in case of CIT v. Milk Food Ltd. [2006] 280 ITR 331, settled issue by holding that once Board has issued instructions that receipts on account of restrictive covenant were not liable to tax, revenue was not entitled to raise contention to contrary. Prior to insertion of section 28(va) with effect from 1-4-2003, non-compete fee received by assessee on account of restrictive covenant was not taxable under Act. Finance Act, 2002, with effect from 1-4-2003 has inserted clause (va) to provide that following receipt (income) shall be chargeable under head 'Profits and gains of business': '(va) any sum, whether received or receivable, in cash or kind, under agreement for- (a) not carrying out any activity in relation to any business; or (b) not sharing any know-how, patent, copyright, trademark, licence, franchise or any other business or commercial right of similar nature or information or technique likely to assist in manufacture or processing of goods or provision for services.' definition does not require total prohibition of carrying on business but refers to any activity relating to business. legal position that emerges from decisions of Courts/Tribunal, instruction of Board and amendment of provisions of Income-tax Act is that- (a)Prima facie compensation/consideration for agreeing to refrain from carrying on competitive business is capital receipt. (b)Restrictive covenant need not be forever. Even if non-compete agreement is for specified period, still consideration would remain to be capital receipt. In Best & Co.'s case, duration of restrictive covenant was five years. (c)It is also law that assessee should completely close all its activities during period of restriction. In Best & Co.'s case, assessee was carrying on innumerable businesses n d restrictive covenant was in respect of one agency. Thus, source of its business income had not completely dried up. Board in Instruction dated 7-3-1999 clarified that curtailment of right to manufacture, produce or process any article or thing need not be complete. Even part curtailment would meet requirement of law. Even in section 28(va), words used are 'not carrying out any activity in relation to any business'. Thus it is not requirement of section 28(va) is that sum received or receivable should be for not carrying on business as such. Applying aforesaid principles, it is submitted that agreement with DCM was clear and without any ambiguity. Restrictive covenant that - Ansals shall not undertake any similar project in vicinity of DCM project was at instance and insistence of DCM. It is undisputed that Ansals (appellant) by virtue of being in business of real estate development has valuable experience and expertise in developing project akin to one undertaken by DCM. Ansals' experience, expertise and reputation was only reason which promoted DCM to insist on restrictive covenant. Consideration for refraining from carrying on certain activity is paid in recognition of potential of person (payee) to adversely affect business interest of payer. Since DCM had no experience in business of real estate development, therefore, it was all more required to refrain Ansals from undertaking similar project in vicinity of area where DCM project was proposed to come up. He accordingly pleaded that sum of Rs. 4.25 crores under consideration constituted capital receipt and not revenue receipt. 8. learned DR Shri K.C. Jain on other hand, kly relied upon appellate order. He further submitted that from agreement it is clear that amount was paid to abandon all rights, claims, interest etc., in relation to development of property owned by DCM. construction already raised or to be raised is transferred to DCM. expenses incurred by assessee in partial development is claimed as expense. deposit received from prospective buyers is also retained by assessee. There is clear understanding that compensation is for annulment of rights of Ansals to carry on business of completing project and for depriving potential income, which could have arisen from carrying on such business, amount is paid. Thus what is compensated is loss of income itself and not loss of profit earning apparatus. In case of former it will be revenue receipt and in case of later it will be capital receipt. learned DR also relied upon various case laws in this regard. (i ) Parry & Co. Ltd. v. Dy. CIT [2004] 269 ITR 177 (Mad.); (ii )Matheson Bosanquet Co. Ltd. v. CIT [1988] 171 ITR 359 (Mad.); (iii )Bishambhar Nath Swaroop Narain v. CIT [1979] 119 ITR 681 (All.); (iv )CIT v. Rai Bahadur Jairam Valji [1959] 35 ITR 48 (SC); (v )Bombay Burmah Trading Corpn. Ltd. v. CIT [1971] 81 ITR 777 (Bom.); and (vi )Kettlewell Bullen & Co. Ltd. v. CIT [1964] 53 ITR 261 (SC). 9. We have carefully considered rival submissions and various case laws on subject. issue to be decided is whether amount received pursuant to agreement dated 30-10-2000 between DCM and appellant is to be treated as capital receipt or revenue receipt. All receipts by assessee would not necessarily be deemed to be income for purpose of Income-tax Act and question whether any particular receipt is income or not will depend on nature of receipt and true scope and effect of relevant taxing provision. It is for revenue to prove that receipt is chargeable to tax under provision of Income-tax Act. Once it is shown that receipt is income under Income-tax Act, it is for assessee to prove that same is either exempt or assessee is eligible for deduction of same. definition of 'income' in section 2(24) is inclusive definition. It adds several artificial categories to concept of income but on that account expression 'income' does not lose its natural connotation. Anything which can properly be described as income is taxable under Act unless of course it is exempted under one or other provisions of Act. Even if receipt does not fall within ambit of any of sub-clauses in section 2(24), it may still be income if it partakes of nature of income. idea behind providing inclusive definition in section 2(24) is not to limit its meaning but to widen its net. word 'income' is of widest amplitude, and it must be given its natural and grammatical meaning. scheme of section 2(24) read with sections 4 and 10, seems to be that given its ordinary natural meaning word 'income' will take in any monetary return 'coming in'. It will take in voluntary and gratuitous payments, any monetary return 'coming in'. It will take in voluntary and gratuitous payments, which are connected or linked with office, vocation or occupation. Income under Act connotes periodical monetary return coming in with some sort of regularity or definite source. source is not necessarily one, which is accepted to be continuously productive but it must be one whose object is production of definite return. At same time, it cannot be said that receipt, which is not periodical or which is not regulated but of one time receipt, cannot be considered as income. source need not be continuously productive and it is sufficient if income is flowing from some exercise or operation by appellant and in ordinary parlance, which can be considered as income. To constitute income, receipt need not necessarily have their origin in business activity or investment or under enforceable obligation. conclusion in construing word 'income', one has to ask whether having regard to all circumstances surrounding particular payment and receipt in question, what is relevant is of character of income according to ordinary meaning of that word in common language or whether it is merely casual receipt. word 'income' is of elastic import and it is extended meaning are not controlled or limited by use of words 'profit and gains'. diverse forms which income may assume cannot exhaustively be enumerated and so in each case decision of question as to whether any number of receipt is income or not must depend upon nature of receipt and scope of relevant taxing provision. Hon'ble Bombay High Court in case of H.H. Maharani Shri Vijaykuverba Saheb of Morvi v. CIT [1963] 49 ITR 594 held thus: 'There is no doubt that under Indian Income-tax Act even payments, which are voluntarily made may constitute 'income' of person receiving them. It is not necessary that in order that payments may constitute 'income', they must proceed from legal source: in that if payments are not made enforcement of payments could be sought by payee in court of law. It does not, however, mean that every voluntary payment will constitute 'income'. Thus, voluntary and gratuitous payments, which are connected with office, profession, vocation or occupation may constitute 'income' although if payments were not made enforcement thereof cannot be insisted upon. These payments constitute 'income' because they are referable to definite source, which is office, profession, vocation or occupation. It could, therefore, be said that such voluntary payment is taxable as having origin in office, profession or vocation of payee, which constitutes definite source for income. What is taxed under Indian Income-tax Act is income from every source (barring exceptions provided in Act itself) and even voluntary payment, which can be regarded as having origin, which practical man can regard as real source of income, will fall in category of 'income', which is taxable under Act. Where, however, voluntary payment is made entirely without consideration and is not traceable to any source, which practical man may regard as real source of his income, but depends entirely on whim of donor, cannot fall in category of 'income'.' 10. We shall discuss case laws relied upon by both counsels. In case of Ram Bahadur Jairam Valji (supra), Hon'ble Supreme Court held that in determination of question whether receipt is capital or income, it is not possible to lay down any single test as infallible or any single criterion as decisive. question must ultimately depend on facts of particular case and authorities bearing on question are valuable only as indicating matters that have to be taken into account in reaching decision. That, however, is not to say that 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 very great extent on particular facts of each case, do involve conclusion of law to be drawn from those facts. When once it is found that contract was entered into in ordinary course of business, any compensation received for its termination would be revenue receipt, irrespective of whether its performance was to consist of single act or series of acts spread over period. There is difference between payment made as compensation for termination of agency contract and amount paid as Solatium for cancellation of contract entered into by businessman in ordinary course of business. In any agency contract actual business consists in dealings between principal and his customers, and work of agent is only to bring about business. What he does is not business itself but something which is intimately and directly linked up with it. agency may, therefore, be viewed as apparatus which leads to business rather than business itself. Considered in this light agency right can be held to be nature of capital asset invested in business. But this cannot be said of contract entered into in ordinary course of business. Such contract is part of business itself, not anything outside it as is agency, and any receipt on account of such contract can only be trading receipt. Because compensation paid on cancellation of trading contract differs in character from compensation paid for cancellation of agency contract, it should not be understood that later must always, and as matter of law, be held to be capital receipt. agency contract which has character of capital asset in hands of one person may assume character of capital asset in hands of one person may assume character of trading receipt in hands of another as, for example, when agent is found to make trade acquiring agencies and dealing with them. Therefore, when question arises whether payment of compensation for termination of agency is capital or revenue receipt, it would have to be considered whether agency was in nature of capital asset in hands of agent, or whether it was only part of his stock-in-trade. Generally, payments made in settlement of rights under trading contract are trading receipts and are assessable to revenue. But where person who is carrying on business is prevented from doing so by external authority in exercise of paramount power and is awarded compensation therefore, whether receipt is capital receipt or revenue receipt will depend upon whether it is compensation for injury inflicted on capital asset or on stock-in-trade. In case of Vazir Sultan & Sons (supra) it has been held by Hon'ble Supreme Court that in considering whether compensation paid to agent on cancellation of his agency is capital receipt or revenue receipt, first question to be considered is whether agency agreement in question was capital asset of assessee's business and constituted its profits-making apparatus and was in nature of its fixed capital or it was trading asset or circulating capital or stock-in-trade of its business. If it was former circulating capital or stock-in-trade of its business. If it was former compensation received would be capital receipt; if agency was entered into by assessee in ordinary course of his business and for purpose of carrying on that business it would fall into latter category and compensation received would be revenue receipt. Hon'ble Supreme Court in case of Gillanders Arbuthnot & Co. Ltd. (supra) held that, having regard to vast array of business done by appellant as agents, acquisition of agencies was in normal course of business and determination of individual agencies normal incident not affecting or impairing its trading structure. amounts received by appellant for cancellation of explosives agency therefore did not represent price paid for loss of capital asset: they were of nature of income. There is no immutable principle that compensation received on cancellation of agency must always be regarded as capital Compensation paid for agreeing to refrain from carrying on competitive business in commodities in respect of agency terminated, or for loss of goodwill, is prima facie of nature of capital receipt. In case of Best & Co. (P.) Ltd. (supra), Hon'ble Supreme Court has held that (i ) that compensation agreed to be paid was not only in lieu of loss of agency but also for respondent accepting restrictive covenant for specified period; (ii )that restrictive covenant was independent obligation which came into operation only when agency was terminated and that part of compensation which was attributable to restrictive covenant was capital receipt and hence not taxable. Beak Inspector of Taxes v. Robson [1942] 25 Tax Cas. 33 (HL) and Gillanders Arbuthnot & Co. Ltd.'s case (supra) followed. (iii )That, on facts, that part of compensation received towards loss of agency was revenue receipt, as loss of agency was only normal trading loss. Gillanders Arbuthnot & Co. Ltd.'s case (supra) relied on. (iv )That, if compensation was paid in respect of two distinct matters, one taking character of capital receipt and other of revenue receipt, there was no principle which prevented its apportionment between two matters. Difficulty in apportionment was not ground for rejecting claim either of revenue or of assessee. Therefore, apportionment had to be made of compensation in this case on reasonable basis between loss of agency in usual course of business and restrictive covenant. Whether compensation received by assessee for loss of agency is capital or revenue receipt depends upon circumstances of each case. But before coming to conclusion one way or other, many questions have to be asked and answered: What was scope of earning apparatus or structure, from physical, financial, commercial and administrative standpoints? If it was business of taking agencies, how many agencies had it, what was their nature and variety, however, they acquired, how were one or some of them lost and what was total income they were yielding? If one of them was given up, what was average income of agency lost? What was its proportion in relation to total income of company? What was impart of giving it up on structure of entire business? Did it amount to loss of enduring asset causing unabsorbed shock dislocating entire or part of earning apparatus or structure? Or, was loss ordinary incident in course of business? But these questions can only be answered satisfactorily if relevant material is available to income-tax authorities. evidence of witnesses in charge of business, relevant accounts and balance-sheets of assessee before and after loss, other evidence disclosing previous history of total business and relative importance of agency lost and present position of business after loss of said agency have to be scrutinized by department. Supreme Court did not lay down in CIT v. Chari & Chari Ltd. [1965] 57 ITR 400 that burden on revenue to establish that income was taxable was immutable in sense that it never shifted to assessee. When sufficient evidence, either direct or circumstantial, in respect of its contention was disclosed by revenue, adverse inference could be drawn against assessee if he failed to put before department material which was in his exclusive possession. While income-tax authorities have to gather relevant material to establish that compensation given for loss of agency was taxable income, adverse inference could be drawn against assessee if he had suppressed documents and evidence, which were exclusively within his knowledge or keeping. In case of KettleWell Bullen & Co. Ltd. (supra), it has been held by Hon'ble Supreme Court that on facts, that arrangement with Mugneeram Bangur and Co. was not in nature of trading transaction, but was one in which appellant parted with asset of enduring value. What assessee was paid was to compensate it for loss of capital asset and was not, therefore, in nature of revenue receipt. It mattered little that appellant did continue to conduct remaining managing agencies after determination of its agency with Fort William Jute Co. It cannot be said as general rule what is determinative of nature of receipt on cancellation of contract of agency or office is extinction or compulsory cessation of agency or office. Where payment is made to compensate person for cancellation of contract which does not affect trading structure of his business or deprive him of what in substance is his source of income, termination of contract being normal incident of business, and such cancellation leaves him free to carry on his trade (freed from contract terminated), receipt is revenue; where by cancellation of agency trading structure of assessee is impaired, or such cancellation results in loss of what may be regarded as source of assessee's income, payment made to compensate for cancellation of agency agreement is normally capital receipt. In case of Bombay Burmah Trading Corpn. Ltd. (supra), Hon'ble Bombay High Court held - Fixed capital is what owner turns to profit by keeping it in his own possession; circulating capital is what he makes profit of by parting with it and letting it change masters. Circulating capital is capital which is parting with it and letting it change masters. Circulating capital is capital which is turned over, and in process of being turned over, yields profit or loss. What is capital asset in hands of one person may be trading asset in hands of another. determining factor is nature of trade in which asset is employed. Compensation received for immobilization, sterilization, destruction or loss, total or partial, of capital asset would be capital receipt. Where compensation is recovered for injury inflicted on man's trading, so to speak, hole in his profits, compensation would go to fill hole and would be trading receipt. On other hand, where injury is inflicted on capital assets of trade, making, so to speak, hole in them, compensation recovered is meant to be used to fill that hole and is capital receipt. Cases of termination resulting in loss of employment or cessation of business must be distinguished from cases of cancellation of contracts which are of trading nature or are entered into in course of business. If sum represents profits in new form, then that is income. But, where agreement relates to structure of assessee's profit-making apparatus and affects conduct of business, money received for cancellation or variation of such agreement would be capital receipt. question is question of fact and must be decided by ascertaining true nature and object of transaction made between parties. In case of Matheson Bosanquet Co. Ltd. (supra) it has been held as under:- 'The assessee entered into agreement with foreign company owning estates in India under which assessee was appointed as sole agent of foreign company in India in regard to management of estates for stated remuneration payable in respect of each financial year. agency was, however, terminated by foreign company in 1970-71 and it was agreed that Indian company would be paid sum of Rs. 3,40,000 as and by way of compensation, payment to be made in three instalments. Apart from said compensation, assessee was also paid sum of Rs. 40,000 as consultation fee. Income-tax Officer in assessment of company for assessment year 1971-72, during which entire money was paid, included amount of Rs. 3,40,000 for assessment under section 28(ii )(b) of Income-tax Act, 1961, rejecting claim of assessee that it was capital receipt. Appellate Assistant Commissioner, however, took view that provisions of section 28(ii )(c) would apply and not section 28(ii )(b) and consequently confirmed assessment. Tribunal, however, held that both sub- clauses (b) and (c) of section 28(ii ) would apply and accordingly confirmed assessment. On reference. Held , that as definition of 'person' found in section 2(31) of Income- tax Act, 1961, included company, amount in question fell under sub-clause (c) of section 28(ii ) and it was not necessary to consider whether sub-clause (b) of section 28(ii ) would apply or not. Tribunal was right in its conclusion that amount of Rs. 3,40,000 could not be regarded as capital receipt but was income liable to tax.' In case of Bishambhar Nath Swaroop Narain (supra) Hon'ble Allahabad High Court held as under:- 'Held , that termination of agreement took place on 31-8- 1958, that compensation related to period from April, 1957 to 31-8-1958, that credit notes for commission had been assessed on accrual basis and that in regard to this source of income assessee was following mercantile system of accountancy and same was accepted by department also. Therefore, when subsequently entire amount was received, department could not tax it on cash basis in year of receipt. If assessee had not returned its commission income correctly on accrual basis, remedy lay elsewhere. Therefore, Tribunal was not justified in holding that amount of Rs. 71,010 was revenue receipt taxable as income of assessee for assessment year 1970-71: Held further, that sum of Rs. 71,010 was paid to assessee as damages for loss of commission which it would have earned if jute mill company had worked according to agreement. It was not case of premature termination of managing agency business but it was case of breach of contract between assessee and jute mill company and it was revenue receipt liable to tax under section 28(ii ) of Income-tax Act, 1961.' In case of Blue Star Ltd. v. CIT [1996] 217 ITR 514 (Bom.), Head Note read as under:- 'The question whether particular income arising from termination of contract is capital receipt or revenue receipt is difficult question to answer. Where, on consideration of circumstances, payment is made to compensate person for cancellation of contract, which does not affect trading structure of recipient's business nor deprive recipient of what in substance is source of income, termination of contract being normal incident of business, and such cancellation leaving recipient of amount free to carry on his trade, receipt is revenue. However, where by cancellation of agency trading structure of assessee is impaired or such cancellation results in loss of what may be regarded as source of assessee's income, payment made to compensate for such cancellation of agency is normally capital receipt. During accounting year relevant to assessment year 1977-78, assessee was engaged in manufacture of air-conditioning products and was undertaking job contracts in air-conditioning. assessee was also trading in electronics and engineering goods and was also exporting its products. On 10-6- 1973, assessee entered into agreement with foreign trade enterprise, BME, under which assessee was appointed as agent of BME for marketing and selling their products in India. said agreement stated that it was, in first instance, valid up to 31-12-1976, and thereafter it was to be considered as automatically renewed for one calendar year at time unless one or other party thereto gave notice of its wish to terminate same. By letter dated 4-6-1976, BME intimated to assessee that BME was agreeable t o extension of agreement for further period of one year and accordingly said agreement stood renewed up to 10-6-1977. But, in meanwhile, Government of India sponsored company C and on 6-10-1976, BME wrote letter to assessee stating that since lot of technical know-how and organization potentialities were needed to handle date process plan made by BME, assessee might assign its rights under said agreement to C which was specializing in particular line. BME agreed to pay to assessee lump sum as consideration for assessee assigning its rights in favour of C. agreement between assessee and BME stood terminated on payment of Rs. 5 lakhs. Income-tax Officer held that amount was assessable and this was upheld by Tribunal. On reference: Held , that agency agreement was entered into by assessee in normal course within framework of normal business of assessee and termination thereof could be treated as normal incident of business. Even with termination of agreement, assessee was left free to carry on its normal trading activities. By cancellation of agency, trading structure of assessee was not impaired. compensation amount of Rs. 5 lakhs received by assessee was not in nature of capital receipt. It was in nature of revenue receipt.' Hon'ble Delhi High Court in case of CIT v. Manoranjan Pictures Corpn. (P.) Ltd. [1997] 228 ITR 202 held thus:- 'It is not possible to lay down any single or exhaustive test, as infallible or any single criterion as decisive, for determination of question whether receipt is capital or revenue in nature. Broadly stated, to determine character of receipt what has to be seen is whether venture in which assessee is giving up its rights was by itself profit-earning apparatus and such action would disrupt entire profit earning structure of assessee. If that be so, anything received would partake of character of capital receipt. But, where, however, venture is only for purpose of carrying on existing business by taking help of another, compensation received for relinquishing right in such venture would be revenue receipt.' Hon'ble Madras High Court in case of Parry & Co. Ltd. (supra) held thus:- 'The Tribunal took note of fact that when compensation was determined parties concerned must have definitely considered very old agency, which assessee had lost and came to conclusion that substantial portion of compensation became payable on account of loss to assessee of lucrative agency. Tribunal rightly pointed out that for proper understanding of intentions of parties concerned, it was necessary t o read agreement as whole and that in understanding nature of payment clause 1 to premature termination of selling agency could not be ignored. Tribunal rightly did not accept plea that as agencies continued only for limited period on ad hoc basis assessee ceased to have any right to compensation on termination. It was rightly held by Tribunal that parties viewed it as case of premature termination of selling agency for which assessee was required to be compensated. Tribunal fixed twenty per cent of total compensation amount as attributable to restrictive covenant and obligations, taking note of fact that restrictive covenants were in force for short period of two years. Tribunal was right in its finding that out of sum of Rs. 25 lakhs received by assessee during year 1988-89 and again Rs. 15 lakhs during year 1989-90 only sum of Rs. 5 lakhs was capital receipt and not liable to tax as income under section 28(ii )(c) of Income-tax Act, 1961.' 11. Applying principle laid down above by us as well as by various High Courts extracted herein above, we now examine facts of present case before us. As noted in agreement between assessee and DCM, assessee received amount of Rs. 4.25 crores whereby assessee agreed to abandon/cease all their rights, claims etc., that accrued in their favour under principal agreement in relation to development of 66.53 acres of land owned by DCM at Bara Hindu Rao, Rohtak Road, New Delhi. construction already raised thereon now stands acquired by DCM. amount was thus paid for rights to develop said land, development had already undertaken by assessee and for being deprived of potential income which could have arisen from carrying on said development business generally. liability of assessee towards provisional booking made by assessee was taken over by DCM. Thus compensation to put in words of Hon'ble Supreme Court in case o f Rai Bahadur Jairam Valji (supra) is compensation received for termination of contract which was entered into in ordinary course of business and hence revenue receipt chargeable to tax. compensation was business and hence revenue receipt chargeable to tax. compensation was paid for termination of contract in ordinary course of business. Thus there is no loss to profit-making apparatus rather it is compensation for loss of profit itself. Whatever was right of assessee pursuant to principal agreement to develop land which was to yield certain profit now stands quantified by way of compensation for loss of such future profit. Thus amount received is in course of business. Such contract is part of business itself and any receipt on account of such contract being terminated can only be trading receipt. payment having been made in settlement of right under trading contract are trading receipts and are assessable as revenue receipt. Much reliance is placed on terms of contract whereby assessee was prevented to carry on similar project in vicinity of project for period of three years so as to hold receipt as capital receipt. We are unable to agree. compensation is for loss of future profit that it would have earned had contract not been cancelled. contract was entered into in ordinary course of business which would have given assessee certain profit by way of development of property. restrictive clause is only not to undertake without prior written consent of DCM similar project in vicinity of project for period of three years. It is to be noted that with approval of DCM, similar projects can be undertaken. restriction is only not to undertake similar project, it is understood that existing project was on huge land of 66.5 acres and that too in heart of New Delhi wherein such huge land is not available for development. Further what is prohibited is not to undertake similar project anywhere or in and around Delhi. This clause has limited significance as only to save interest of DCM who was to develop property as absolute owner. However, by such restriction assessee was not to go out of business or its profit-making apparatus is not taken away. Based on principles laid down by us as well as by various courts, we find that receipt is revenue in nature and chargeable to tax as such. Accordingly ground No. 2 is to be dismissed. 12. In ground No. 3 it is contended that even if amount is not treated as capital receipt in its entirety, at least part of compensation attributable to restriction covenant should have been excluded as capital receipt. 13. After hearing both parties, we are unable to carve out any amount s towards restrictive covenant. compensation was for loss of future profit and also for development already undertaken by assessee. expenses in relation to such development have been claimed and allowed as revenue expenditure. Thus what is paid is almost towards liabilities taken over and for deprivation of potential income. There is no mention in agreement that amount is paid towards restrictive covenant as is evident from following: '2. That KNA and Ansals agreed to abandon/cessation of all their rights, claims, interests and activities whatsoever there might have been under Principal Agreement, which stands annulled, in relation to 66.53 acres of land owned by DCM at Bara Hindu Rao, Rohtak Road and Kishan Ganj, New Rohtak Road, Delhi, or construction already raised or to be raised thereon. DCM has agreed to acquire all such rights, claims, interests etc. of KNA and Ansals. DCM shall hereafter take over from KNA and Ansals construction of flatted factory complex and residential group housing complex on said land hitherto carried on by KNA and Ansals under annulled Principal Agreement, and all t h e assets, excluding security deposit, relating to Project including any construction carried out at Project site respectively belonging to KNA and Ansals. KNA and Ansals have further agreed that they shall not undertake without prior written consent of DCM similar project in vicinity of project for period of three years from date of signing of this agreement. 3. In consideration of above, DCM has agreed to take over all liabilities/obligations of both KNA and Ansals respectively under provisional bookings made and/or arrangements/agreements entered into by them with their respective prospective buyers, as per particulars in Annexures 'C' and 'D' to Settlement Agreement, including amounts towards basic price and which amounts on execution of stand transferred to books of account of DCM and DCM is now in its books showing said amounts to credit of said prospective buyers. DCM undertakes with KNA and Ansals to pay, satisfy and fulfil all duties, liabilities, obligations, contracts and engagements of KNA and Ansals in relation to their respective prospective buyers as under said provisional bookings/agreements/arrangements made with them and to provisional bookings/agreements/arrangements made with them and to indemnify KNA and Ansals against all proceedings, claims, demands, damages and compensation in respect thereof and amounts towards basic price as aforesaid. DCM has further agreed to pay compensation for annulment of very rights of KNA and Ansals to carry on business of completing project under Principal Agreement and for being deprived of potential income which could have arisen from carrying on such business sum of Rs. 6.75 crores to KNA, which is inclusive of refund of security deposit of Rs. 3.90 crores, and sum of Rs. 8.25 crores to Ansals, which is inclusive of refund of security deposit of Rs. 4 crores respectively.' [Emphasis supplied] Thus entire amount is to be treated as revenue receipt and chargeable to tax as such. 14. In result, appeal is dismissed. *** ANSAL PROPERTIES & INDUSTRIES LTD. v. DEPUTY COMMISSIONER OF INCOME TAX