2022 (10) TMI 664 - SCH - Income Tax

Land acquisition refund deemed taxable income; court dismisses appeal.

Manoj B. Joshi Versus The 8th Income Tax Officer And Ors.

The Supreme Court upheld the findings of the assessing officer and the High Court in a case regarding a Memorandum of Understanding for land acquisition ... Classification or categorization of the income - 'income from long-term capital gain' OR 'income from other sources' - amount in issue was paid to the appellant only to safeguard Mr. Dalvi from any claim(s) likely to be made against him by the person who had booked the flats through the appellant, since Mr. Dalvi did not construct the flats as agreed by him earlier - HELD THAT:- The findings of fact recorded by the assessing officer, which have been affirmed right till the High Court, are – (i) the appellant had entered into a Memorandum of Understanding dated 10.04.1985 with one Shirish Dalvi, a developer who was to acquire certain pieces and parcels of the land in Village Barve, Taluka Kalyan and thereupon construct residential buildings/apartments; (ii) the appellant had collected funds from prospective members of the proposed society; (iii) these funds were transferred to Shirish Dalvi; (iv) subsequently, Shirish Dalvi faced legal problems in acquiring the land and in obtaining clear title and necessary permissions; (v) thereupon, another Memorandum of Understanding dated 01.12.1989 was arrived and executed between the appellant and Shirish Dalvi, pursuant to which the amount received from the proposed members was refunded to the appellant, albeit this amount has not been brought to tax as income of the appellant, but another amount of Rs. 29,11,000/- (Rupees Twenty Nine Lakh and Eleven Thousand Only) received statedly as compensation by the assessee has been brought to tax as income from other sources. We do not find any justification and reason to hold that this amount received was not taxable being a capital receipt. Whether or not the amount would be taxable as income from business or income from other sources, need not be examined and answered in the present case. Appeal dismissed. Issues Involved:Taxability of received amount as income from business or other sources.Analysis:The Supreme Court upheld the findings of fact by the assessing officer and the High Court regarding a Memorandum of Understanding entered into by the appellant with a developer for land acquisition and construction. The appellant collected funds from prospective society members, which were transferred to the developer. Subsequently, due to legal issues faced by the developer, another agreement was made for refunding the amount to the appellant. The Court ruled that the refunded amount of Rs. 29,11,000 was taxable as income from other sources, dismissing the appeal without costs. The Court did not delve into whether the amount should be taxed as income from business or other sources, based on the factual background presented. The judgment emphasized the taxability of the received amount as income, without considering its classification under specific income sources.