The Respondent is the successor-in-interest and legal representative of the deceased Assessee. The Assessee was a journalist by profession and was appointed as the Foreign Correspondent in India of a German news magazine Der Spiegel by an agreement dated 14th December 1970 at a monthly flat rate honorarium of $250 in addition to a further payment for any published contributions whose copyright would be with the German publisher. Either party could terminate the contract at the end of a calendar quarter by giving notice of six weeks. Der Speigel terminated the contract with effect from 1st December 1993 and paid compensation of DM 3,00,000 (Rs.53,82,000) for the association of the past 23 years and loss of work space.
In the original return the assessee claimed this amount as a revenue receipt but on revising the return, it was claimed to be a capital receipt.
The Assessing Officer (AO) by the order dated 20th February, 1995 negatived the plea that the aforementioned amount was a capital receipt. It was held that the termination of contract with Der Spiegel did not mean that the Assessee had lost his right of authorship in future “for all the publications in the universe”. It was observed that since the Assessee was free to contribute his article/stories etc. to any other magazine, publication, the Assessee “neither had any right/ claim over the sum so received from Der Spiegel, nor it was anticipated by him.”
The Assessee then filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], who by order dated 4th July, 1997 held in favour of the Assessee. The CIT(A) observed inter alia as under:
