TaxTMI 
TaxTMI 
2013 (12) TMI 776
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....8. 2.1 The brief facts of the case are that the assessee entered into an Agreement for purchase of two residential flats (at Dev Tirth Building, Village Chittalsar, Thane) with one, M/s. Patel and Salot Associates, Mumbai ('the Builder' hereinafter) for Rs.3.45 lacs each on 02.07.1994. The amounts were paid, at Rs.6.40 lacs in aggregate, representing about 90% of the purchase cost, to the Builder in pursuance of the said Agreement. However, as the possession of the flats was not forthcoming even after a lapse of ten years, the assessee approached the District Consumer Redress Forum, Thane ('the court' hereinafter), which directed the Builder to refund the entire amount received, i.e., Rs.6.40 lacs, to the assessee along with interest @ 9....
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....owever, as the said property is non-existing at the time of contract, but proposed to be constructed in future, the same is in the nature of an inchoate right. The same is to develop and flower over time, in correspondence with the physical developments that may take place, as for example where a plot of land is purchased, clearances obtained, and construction progressed, so that the right (capital asset) itself gains in value. It is for this reason that the Agreements generally provide for a payment schedule over the anticipated construction program. On the other hand, no development may take place, rendering the said right valueless, or almost so. 3.2 However, as it transpires in the instant case, the assessee, with no hope of being de....
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....d a valuable right, and toward which he has received the excess amount. The assessee's plea that the interest received is not 'interest' u/s. 2(28A) of the Act inasmuch as the (principal) sum paid, i.e., on which interest stands allowed, does not represent either a borrowing or a debt incurred by the Builder, is again of no moment. Firstly, the issue before us is not whether the sum paid by way of interest qualifies under the given facts and circumstances to be an 'interest' under the Act or not, as it would be in a case where the issue involves application of a TDS provision thereon, etc., but whether the said receipt, representing a compensation, is revenue or capital in nature, and which we have found to be revenue in nature, being no....
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....s of the Agreement, the excess is only a revenue receipt, assessable u/s. 56. The compensation of Rs.15,000/- awarded by the court is no doubt on capital account and, thus, not income by definition. 3.3 We may next discuss the decisions relied upon by the assessee, which would also provide an opportunity to review the law and the precedents in the matter. Without doubt, property of any kind, where not forming part of the stock-in-trade of a business, is a the capital asset by definition (s. 2(14)). There is no dispute as to the position of the law qua 'capital asset', even as explained by the hon'ble jurisdictional high court in CIT v. Tata Services Ltd. [1980] 122 ITR 394 (Bom). However, as sought to be explained hereinbefore, what the ....
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.... facts and circumstances of these cases, where the interest was granted by way of damages, in addition to possession, while in the instant case the assessee's right is limited to recover the amount paid (for the purchase of flats) at the contracted rate of interest, on being so demanded by the buyer on the construction having not been completed by the specified date (30/12/1994). The essential difference, as explained by the apex court in Dr. Shamlal Narula (infra), is whether the interest is for the deprivation of possession or for the deprivation of the use of money. We may nevertheless also refer to some celebrated decisions, highlighting the different aspects of the matter, settling the relevant issues having a bearing in the matter:....