Capital receipt treatment for relinquished development rights: compensation was held not taxable as business income or capital gains.

Compensation received for relinquishing a right to sue and surrendering development-related rights was treated as a capital receipt, not taxable as business income or capital gains. The Tribunal relied on the absence of any development activity, the fact that no consideration had been paid by the assessee, and that the assessee held only a limited licence-type right to enter the land. It held that the statutory bar on transfer of agricultural land, coupled with the lack of any enforceable transferable interest or actionable claim, meant no capital gains charge could arise. It also found that the arrangement did not amount to part performance requiring compulsory registration.

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Issues: Whether compensation received for relinquishment of the right to sue and surrender of development-related rights was taxable as business income or capital gains, or constituted a non-taxable capital receipt.

Analysis: The Tribunal found the facts to be identical to the assessee's earlier year and followed the coordinate bench decision. It noted that no development activity had been carried out on the lands, no consideration had been paid by the assessee, and the assessee had only a limited licence-type right to enter upon the land. In view of the statutory bar on transfer of agricultural land and the absence of any enforceable transferable interest or actionable claim capable of giving rise to capital gains, the compensation could not be brought to tax as business income or capital gains. The Tribunal also held that the arrangement did not amount to part performance requiring compulsory registration.

Conclusion: The compensation was held to be a capital receipt not chargeable to tax as business income or capital gains, and the Revenue's challenge failed.

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