BONAFIDE EXPORTERS,MUMBAI vs. ITO 13(2)(1), MUMBAI

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ITA 5817/MUM/2011Status: DisposedITAT Mumbai23 September 20163 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the compensation received for giving up the right to obtain conveyance of immovable property is assessable as capital gains. The right acquired under the agreement for sale constitutes a capital asset.

What were the facts?

The assessee received a refund of Rs. 12.50 lakhs and Rs. 9.43 lakhs as compensation for the cancellation of a flat booking. The assessee offered this compensation as capital gains, but the AO treated it as revenue receipt, considering it as interest accrued.

What were the issues?

The key issue was whether the compensation received for cancellation of a flat booking should be treated as capital gains or revenue receipt.

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI

Before: SHRI D. KARUNAKARA RAO & SHRI RAVISH SOOD

For Appellant: Shri Haresh P. Shah
Hearing: 08.09.2016Pronounced: 23.09.2016

सुनवाई की तायीख / Date of Hearing : 08.09.2016 घोषणा की तायीख /Date of Pronouncement : 23.09.2016 आदेश / O R D E R

PER D. KARUNAKARA RAO, AM:

1.

This appeal filed by the assessee on 17.8.2011 is against the order of the CIT (A)-24, Mumbai dated 28.6.2011 for the assessment year 2008-2009. In this appeal, assessee raised five grounds in toto.

2.

The only issue involved in the grounds raised by the assessee relates to the correct head of income for taxing the compensation received by the assessee in view of the cancellation of the flat at Borivali. There is a purchase agreement, cancellation agreement placed in the paper book. Narrating the facts, Ld Counsel for the assessee submitted that the assessee paid a sum of Rs. 12.50 lakhs in the year 1998 and booked a flat at Borivali. In the year 2007, assessee received the refund of the entire amount of Rs. 12.50 lakhs along with the compensation of Rs. 9,43,000/-. Assessee offered the said amount as capital gains in the return of income furnished by the assessee for the AY 2008-2009. During the assessment proceedings, AO held that the said amount of Rs. 9.43 lakhs constitutes „revenue receipt‟ for the reason that the said amount is in the nature of „interest‟ accrued over the years on the initial payment of Rs. 12.5 lakhs. For this proposition, AO relied on the clause-14 of the purchase agreement. Accordingly, he treated the same as „revenue receipt‟ and taxed the same under the head „income from other sources‟. Aggrieved, assessee carried the matter in appeal before the first appellate authority.

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