Capital asset rights in property were treated as taxable transfer consideration, not mesne profits or other income.

Rights in immovable property, even if imperfect or unsupported by perfect legal title, can still constitute a capital asset for tax purposes. A receipt referable to transfer of such rights is treated as capital in nature, and it does not become taxable under the head "Income from other sources" merely because it is not a perfect capital gain under section 45. Mesne profits arise from wrongful possession and are not applicable to consideration received by an owner on transfer of her rights. On that basis, the receipt was treated as attributable to transfer of capital asset rights, with section 54F exemption following.

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Issues: Whether the receipt of Rs. 11,00,000 from transfer of rights in the bungalow was taxable as capital gains from a capital asset, or could be treated as mesne profits and taxed under the head 'Income from other sources'.

Analysis: Rights in property, even if imperfect and not supported by perfect legal title, can constitute a capital asset. The receipt was referable to the transfer of such rights acquired earlier and reflected in the assessee's returns. A capital receipt not chargeable under section 45 does not become taxable merely because it is not a perfect capital gain. Mesne profits, as defined in civil procedure law, arise from wrongful possession and have no application to consideration received by an owner on transfer of her rights.

Conclusion: The receipt was not liable to be assessed as mesne profits or as income from other sources; the amount was attributable to transfer of capital asset rights, and exemption under section 54F followed accordingly. The Revenue's challenge failed.

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