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

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.

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.