×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
08-01-2020, Popular Estate Management, Section 6(e), 68, Tribunal Ahmedabad
The captioned appeal has been filed at the instance of the Assessee against the order of the Commissioner of Income Tax (Appeals)–9, Ahmedabad [CIT(A) in short] vide appeal no.CIT(A)-9/121/DCIT.Cir3(1)(1)/15-16 dated 25/10/2017 arising in the assessment order passed under s.143(3) of the Income Tax Act, 1961(hereinafter referred to as "the Act") dated 27/03/2015 relevant to Assessment Year (AY) 2012-13.
The assessee has raised the following grounds of appeal:-
1. The Ld.CIT(A) has grossly erred in law and on facts in dismissing the appeal. He ought to have allowed the appeal fully in accordance with the grounds of appeal raised by the appellant before him.
I. Addition on account of alleged unexplained cash credit u/s.68 of he I.T.Act, 1961 on account of relinquishment of right – Rs.18,02,53,000/-.
1. The Ld.CIT(A) has erred in law and on facts in confirming the addition of Rs.18,02,53,000/- as made by the Ld.A.O. whi e treating the compensation received for relinquishment of right to sue as taxable busi ess income and accordingly revenue receipt as against the4 capital r ceipt not assessable either as capital gains or business income.
2. That the Ld.CIT(A) has failed to consider the fact that the rights acquired by the appellant company under different development agreements was a “Right to Sue” and as per the provisions of section 6(e) of the Transfer of Property Act, “Right to Sue” is not a property and thereby it is not a “Capital Asset” and as a consequence, impugned receipt of Rs.18,02 53,000/- received as compensation/damages for relinquishment of right to sue in the Courts of law is a “capital receipt” in the hands of the appellant ompany not assessable either as capital gains or business income in view of the Hon’ble Jurisdictional Gujarat High Jurisdictional High Court in the case of (i) Baroda Cement & Chemicals Ltd vs. CIT 158 ITR 636 (Guj.), (ii) CIT vs. Hiralal Mani al Mody 131 ITR 421 (Guj.), (iii) Hon’ble Calcutta High Court in the case f CIT vs. Ashoka Marketing Ltd. 164 ITR 664 (Cal.), (iv) CIT vs. J. Dalmia 149 ITR 215 (Del.) & (v) Satyam Food Specialties (P) Ltd. vs. DCIT, Central Circle-2, Jaipur  57 taxmann.com 194.
3. The Ld.CIT(A) has grossly erred in law and on facts in failing to consider the fact that Hon’ble ITAT, Ahmedabad “A” Bench in the case of appellant company’s own case rendered the appellate order vide ITA No.212/Ahd/2014 dated 29/08/2017 for AY 2009-10, wherein, the compensation for relinquishment of right to sue was the grounds of appeal being the said compensation whether subject to tax or not was the issue and the Hon’ble ITAT, Ahmedabad, “A” Bench has allowed the appeal of the appellant company in favour of the appellant company by holding that the amount received as a capital receipt not assessable either as a capital gain or business income in view of the Hon’ble Jurisdictional High Court in the case of (i) Baroda Cement & Chemicals Ltd. vs. CIT 158 ITR 636 (Guj.), (ii) CIT vs. Hiralal Manila I Mody 131 ITR 421 (Guj.), (ii) Hon’ble Calcutta High Court in the case of CIT vs. Ashoka Marketing Ltd. 164 ITR 664 (Cal.), (iv) CIT vs. J. Dalmia 149 ITR 215 (Del.) & (v) Satyam Food Specialties (P) Ltd. vs. DCIT, Central Circle-2, Jaipur  57 taxmann.com 194 and thereby deleted the addition as made by the Ld. A.O. in the assessment order and copy of the Hon’ble ITAT order dated 29/08/2017 for AY 2009- 10 has already been provided to the Ld.CIT(A) in the appellate proceedings. The appellant company reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing.
The appellant therefore respectfully prays that :-
1. The addition of Rs.18,02,53,000/- on account of alleged unexplained cash credit u/s.68 of the I.T.Act, 1961 confirmed by the Ld.CIT(A) may kindly be deleted.
2. Such and further relief as the nature and circumstances of the case may justify.
The effective ground of appeal raised by the assessee is that the ld. CIT(A) erred in confirming the order of the AO by treating the capital receipt of Rs. 18,02,53,000/- as income of the assessee.
2. The facts in brief are that he assessee in the present case is a limited company and engaged in the business of construction and engineering activities. The AO during the assessment proceedings observed that the assessee has received certain amount for relinquishment of its right which was treated as capital receipt, not chargeable to tax. However, the AO was of the view that such receipt in the hands of the assessee is revenue receipt and chargeable to tax. Accordingly he show caused the assessee vide notice dated 20th March 2015 proposing to treat such amount as revenue receipts.
2.1. However, the assessee in response to such notice did not make any submission on merit. Therefore the AO in the absence of any documentary evidence, and further observing that similar receipt was treated as income of the assessee in the earlier assessment year, treated the same as unexplained cash credit under section 68 of the Act and added to the total income of the assessee. Aggrieved assessee preferred an appeal to the learned CIT(A).
3. The assessee before the learned CIT (A) submitted that it has entered into the agreements with different societies which were holding the agriculture lands. As per the agreement, the assessee was appointed by the societies as project consultant and organizer to develop such agricultural lands. There was also a clause in the agreement that in case the society terminates the dev lopment agreement or wishs to sale the land, then the assessee shall have the pre-emptive right for the purchase of such land. Similarly, there was also a clause in the agreement that in case the society terminates the agreement and does not wish to sell the land to the assessee, then the societies will pay compensation to the assessee.
3.1 As such, the societies terminated the agreement and decided to sell the land to different persons after making the payment of the compensation to the assessee. Accordingly the assessee claimed to have received a sum of Rs.18,02,53,000/- as compensation by relinquishing its right in such properties/lands of the societies. Thus the assessee further claimed that such compensation represents the capital receipt not chargeable to tax.