Dr. B.P. Saraf, J.By this reference u/s 256(1) of the income tax Act, 1961 ( the), the Tribunal has referred the following question of law to this Court for its opinion:

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amount of Rs. 32,500 received by the assessee from Harshad Dye Chem Industries represents a capital receipt

The facts of this case are in a narrow compass. The assessee is a limited company. During its manufacturing activity, the assessee had acquired technical know-how relating to the manufacture of reactive dyes. Three of the employees of the assessee made technical know-how available to another company Harshad Dye Chem Industries. These three employees of the assessee left the services of the assessee and joined the other company. The assessee filed a suit against these three employees and also the other company for damages. A settlement was arrived at by which the assessee received a sum of Rs. 33,061 during the year 1970-71 and a further sum of Rs. 32,500 in the year under reference from Harshad Dye Chem Industries as compensation for damages of the capital receipts. The assessee claimed the above receipts in question as capital receipts. The contention of the assessee that the aforesaid amounts constituted capital receipts was rejected by theO. On appeal, the AAC decided the issue of capital receipts in favour of the assessee. The order of the AAC was upheld by the Tribunal. Hence, this reference at the instance of the revenue.

2. We have heard the learned counsel for the parties and perused the facts of the case. It is clear from the facts of the case that the payment was received by the assessee from another company Harshad Dye Chem Industries as compensation by way of settlement for the technical know- how which was illegally made available to them by the employees of the assessee and not from the employees themselves who left the services of the assessee-company and joined the other company. Having regard to the decision of the Supreme Court in the case of Scientific Engg. House (P.) Ltd. v. CIT [1986] 157 ITR 86 1, we do not find any infirmity in the decision of the Tribunal holding the receipts in question to be capital receipt and not a revenue receipt.

3. We, therefore, hold that the Tribunal was justified in holding that the amount of Rs. 32,500 received by the assessee from Harshad Dye Chem Industries represents capital receipt. Accordingly, the question referred to us, is answered in the affirmative, i.e., in favour of the assessee and against the revenue. In the circumstances of the case, we make no order as to costs.