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Facts
The assessee purchased a flat and later entered into a buy-back agreement with the seller, M/s. Vatika Ltd. The agreement stipulated the refund of the principal amount and a premium. The AO added Rs.16,11,000/- to the assessee's income, representing a portion of the buy-back amount that was allegedly not offered to tax.
Held
The Tribunal held that the assessee is an individual and has not recognized the entire interest as received, as evidenced by not claiming TDS on the premium. The buy-back agreement also indicates that the principal is repaid first, followed by the interest. Therefore, the addition made by the AO and confirmed by the CIT(A) is deleted.
Key Issues
Whether the amount of Rs.16,11,000/- representing part of the buy-back premium/interest is taxable income when it has not been received by the assessee?
Sections Cited
Section 2(24) of the Income Tax Act, 1961 (implied by the context of income and additions)
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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI GEORGE MATHAN & SHRI MADHUSUDAN SAWDIA
O R D E R Per Bench : This is an appeal filed by the assessee against the order of the Ld.CIT(A), Kolkata-22, dated 16.01.2025 for the assessment year 2018- 2019.
It was submitted by the ld. AR that the only issues in the asseessee’s appeal was in regard to an addition of Rs.16,11,000/- representing the interest in respect of buy-back of a flat purchased by the assessee from M/s.Vatika Ltd. It was the submission that the assessee had purchased a flat for a consideration of Rs.38,11,000/- from M/s. Vatika Limited. Under the buy-back agreement with M/s. Vatika Ltd, the assessee was to receive the entire principal amount of Rs.38,11,000/- and interest under the name of premium of Rs.26,00,000/-. Thus, the total consideration receivable by the assessee form the M/s.Vatika Limited was Rs.64,11,000/-. It was the submission that M/s. Vatika Limited had paid the assessee an amount of Rs.48,00,000/- resulting in payment on account of interest of Rs.9,89,000/- However, M/s Vatika Ltd. had deducted TDS to an extent of Rs.2,60,000/- on the entire interest amount of Rs.26,00,000/-. As the assessee had not received the amount of Rs.16,11,000/-, the assessee had not offered the said amount to tax. The Ld. AR drew our attention to the email correspondence of M/s Vatika Ltd. with the assessee, which reads as follows:-
It was submission that as per the email from M/s Vatika Ltd. the initial payment was against the principal and the final payment was to be made against the interest/premium. It was the submission that as the entire interest/premium has not been received by the assessee, the assessee had offered only such interest/premium which has been received and the balance of Rs.16,11,000/- had not been offered to tax. It was further submission that the assessee has also not claimed the credit of TDS on the said premium in its return of income. It was the submission that the AO accepted the fact that the M/s Vatika Ltd. was to pay back to the assessee total amount of Rs.64,11,000/-. The AO has also accepted that the assessee has received Rs.48,00,000/-. It was the further submissions that the AO took the stand that the assessee had not offered the difference of Rs.16,11,000/- to tax. The assumption drawn by the AO was that the assessee has received the entire premium/interest accepted by the M/s Vatika Limited and the amount of Rs.16,11,000/- represented part of the principal which was due to the assessee. It was submitted by the Ld.AR that the assessee has filed its dispute before the Consumer Forum and the matter is pending for resolution. It was the submission that what is due from the M/s. Vatika Limited was the part of the premium/interest portion and not the principal. It was the prayer that the assessee is an individual and the premium/interest would be offered to tax when the same is received by the assessee and the assessee is yet to receive the premium/interest of Rs.16,11,000/-. It was the prayer that the addition as made by the AO and as confirmed by the Ld.CIT(A) may be deleted.
In reply, the Ld.Sr DR submitted that the assessee has not provided all the details before the AO.
We have considered the rival submissions. A perusal of the page No.12 of the order of the Ld.CIT(A) clearly shows that all the documents had been submitted by the assessee and remand proceedings had also been done before the AO. The assessee, admittedly, is an individual. The email of M/s Vatika Limited to the assessee clearly shows that initially the principal would be repaid and then the interest. There is no reason to come to the conclusion that what has been received by the assessee is entirely of the premium/interest amount. There is no document also which gives such suggestion. The fact also remains that the assessee has not claimed the credit of TDS in respect of the premium/interest. This clearly shows that the assessee has not recognized that the entire interest has been received.