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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI R.S. SYAL & SHRI S.S. VISWANETHRA RAVI
आदेश / ORDER
PER S.S. VISWANETHRA RAVI, JM :
This appeal by the assessee against the order dated 12-08-2016 passed by the Commissioner of Income Tax (Appeals)-1, Nashik for assessment year 2012-13.
2 ITA No.2532/PUN/2016, A.Y. 2012-13
The only issue is to be decided as to whether the Commissioner of Income Tax (Appeals) is justified in confirming the addition made by the Assessing Officer on account of compensation received holding the same as revenue in nature as against the claim of capital in nature in the facts and circumstances of the case.
Heard both parties and perused the materials available on record. The brief facts of the case as emanating from the records are that the assessee is an individual and conduct his business under the name and style of “M/s. Shivang Automobiles”. The assessee is authorized dealer of two wheelers. During the course of assessment proceedings, the Assessing Officer held the compensation said to have been received by the assessee from M/s. Suyojit Infrastructure Pvt. Ltd. is revenue in nature and held the same to be chargeable to tax. The contention of the assessee was that it is not chargeable to tax and is a capital in nature as it was received on loss of an investment opportunity. The Assessing Officer did not found the submissions of assessee acceptable and treated the same as revenue receipt added the said amount to the total income of the assessee vide its order dated 24-03-2015 passed u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). In challenge, before the Commissioner of Income Tax (Appeals), the assessee reiterated the same submissions as made before the Assessing Officer. The Commissioner of Income Tax (Appeals) confirmed the view of Assessing Officer and upheld the addition made thereon. The assessee is before us aggrieved by the order of Commissioner of Income Tax (Appeals).
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It is noted that the assessee entered into an agreement on 12-10-2007 with M/s. Suyojit Infrastructure Pvt. Ltd. for purchase of 1,00,000 Sq. ft. equivalent to 9293.68 Sq. mtrs. of TDR for a total consideration of Rs.1,10,00,000/-. In pursuance of said agreement the assessee paid an amount of Rs.30,00,000/- vide two cheques dated 26-09-2007 and 18-10-2007, respectively and agreed to pay remaining amount within six months. The vendor i.e. M/s. Suyojit Infrastructure Pvt. Ltd. agreed to give the TDR on or before 12-08-2008. It is noted that due to some unavoidable reason, the aforesaid agreement could not be complied and the same has been cancelled by way of cancellation deed dated 12-12-2011 wherein it was agreed that the extra consideration of Rs.20,00,000/- is paid as compensation. As discussed above, the Assessing Officer and Commissioner of Income Tax (Appeals) treated the same revenue in nature. Therefore, a question stands for our consideration whether such payment of compensation for termination of an agreement is a capital or a revenue receipt, it would have to be considered whether purchase of TDR is in the nature of capital receipt in the hands of assessee or whether it was only part of stock-in-trade? The fact remains admitted that there was no evidence brought on record by the Revenue that the assessee is a dealer in immovable properties, therefore, purchase of TDR is found to be practically capital asset in the hands of assessee and the receipt of compensation on account of it is to be held as capital receipt.
The ld. DR Shri Sudhendu Das placed reliance on the decision of Hon’ble Supreme Court in the case of CIT Vs. Rai Bahadur Jairam Valji reported in 35 ITR 148 (SC). On perusal of the same, we find that the assessee therein entered into an agreement to supply as limestone and
4 ITA No.2532/PUN/2016, A.Y. 2012-13
dolomite. Thereafter, the said contract has been terminated by both the parties therein and Rs.2,50,000/- was paid to the assessee therein. It clearly shows that the payment is out of settlement of contract not a payment on account of any capital expenditure and at no time the assessee therein was prevented from carrying on business. It means to say the termination agreement dated 09-05-1940 at no point of time which operated as a bar to the carrying on a business by the assessee therein. Therefore, it clearly shows that there was no loss accrued to the assessee therein to treat the compensation received as capital receipt. Thereby we are of opinion that the facts and circumstances of the decision in the case of Commissioner of Income Tax Vs. Rai Bahadur Jairam Valji (supra) as relied by the ld. DR, Shri Sudhendu Das is distinguishable and does not come to the rescue of respondent Revenue.
The contention of the ld. AR was that the assessee purchased TDR from capital account. The assessee and M/s. Suyojit Infrastructure Pvt. Ltd. are not at all related parties and the Assessing Officer erred in treating the compensation as revenue receipt without conducting independent enquiry with that of said party. Further, he contended that the provisions of section 28(ii)(c) of the Act does not apply to the facts and circumstances of the case and there is no specific provision to bring the compensation to tax in the Act. As rightly pointed by Shri P.S. Shingte, Ld. AR, the said compensation is not covered by the provisions contemplated in (ii)(a) to (e) of section 28 of the Act. Therefore, we hold that a compensation received by assessee is held to be capital receipt. Thus, the order of Commissioner of Income Tax (Appeals) is not justified and it is set aside. Therefore, the grounds raised by the assessee are allowed.
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In the result, the appeal of assessee is allowed.
Order pronounced in the open court on 18th September, 2019.
Sd/- Sd/- (R.S. Syal) (S.S. Viswanethra Ravi) VICE PRESIDENT JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 18th September, 2019 RK आदेश की प्रनिलऱपप अग्रेपषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त (अऩीऱ) / The CIT(A)-1, Nashik 3. 4. The Pr. Commissioner of Income Tax-1, Nashik ववभागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, “बी” बेंच, 5. ऩुणे / DR, ITAT, “B” Bench, Pune. गार्ड फ़ाइऱ / Guard File. 6. //सत्यावऩत प्रतत// True Copy// आदेशानुसार / BY ORDER,
तनजी सधचव / Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune