AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (3) TMI 727
X X X X Extracts X X X X
X X X X Extracts X X X X
....rned by the assessee on receipt of compensation on relinquishment of right to obtain conveyance of land as per the agreement entered with the vendor companies. 3. On the facts and in the circumstances of the case, the Ld.CIT(A)- XV, Ahmedabad ought to have upheld the order of the Assessing Officer. 4. It is therefore, prayed that the order of the Ld.Commissioner of income-tax(A)-XV, Ahmedabad may be set aside and that of the Assessing officer be restored. 2. Ground Nos.1 & 2 are inter-connected. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 30.12.2009, thereby the Assessing Officer(AO) made addition of Rs.10,44,08,966/- on account of long term capital gain received as damages awarded under the Arbitration and Conciliation Act, 1996. Against this, the assessee filed an appeal before the ld.CIT(A), who after considering the submissions and following the decision of the Hon'ble Gujarat High Court rendered in the case of Baroda Cement and Chemicals Ltd. vs. CIT reported at 53 CTR 260 :: 158 ITR 636 delete....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... only opted a forum other than civil court for enforcing his right to sue. He submitted that as per the settlement arrived at the Ld.Arbitral Tribunal dated 03/10/2006, it was clearly stipulated in the settlement that the assessee shall accept the amount in full and final settlement for relinquishing the right to sue for the specific performance of the agreement. He submitted that the damages were received only as a compensation to extinguish the right to sue. He submitted that the law is well settled that in a breach of contract what survive is only right to sue. In support of this contention, he relied on the decision of Hon'ble Apex Court rendered in the case of Union of India vs. Raman Iron Foundry AIR 1974 SC 1265. He submitted that the issue is squarely covered by the decision of Hon'ble Jurisdictional High Court rendered in the case of Baroda Cement and Chemicals Ltd. vs. CIT(supra). 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The contention of the Revenue as submitted by way of statement of facts is reproduced as under:- "Statement of facts Reg:- Shri Shekhar G. Patel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eference to definition of "transfer' u/s 2(47) of the Act. Reliance was also placed on the case of Sunil Sidharthbhai Vs. CIT 156 ITR 509 and the other decisions in favour of Revenue have been relied. It may be further noted that the CIT(A) has failed to appreciate the true nature of the receipts in the hands of the assessee. By entering into an agreement, for sale(purchase) of land with the vendor companies the assessee had in fact acquired a right to have the immovable property conveyed to him which right was assignable, had to be considered to be "property" and, therefore, a "capital asset" as held by Bombay High Court in CIT v. Sterling Investment Corporation Ltd. [1980] 123 ITR 441. Hon'ble Bombay High Court in the case of CIT v. Tata Services Ltd. [1980] 122 ITR 594 had further observed that a contract for the sale of land was capable of specific performance and was assignable and in this behalf, relied upon the old Madras High Court's judgment reported in Venkateswara Aiyar v. Kallor Illath Raman Namubdhri, AIR 1917 Mad 358. It concluded that a right to obtain conveyance of immovable property was property as contemplated by section 2(14) of the Income-tax A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as right in the view that it took that the payment of earnest money under the agreement for sale was the cost of acquisition of the capital asset." In view of the above discussion and looking to the facts of the case, the decision of the Hon'ble CIT(A) is not acceptable and it is prayed that the order of the CIT(A) be set aside and that of the Assessing officer be restored. Sd/- Dy.CIT, Circle-9, Ahmedabad" 4.1. We have to examine the rival contentions in the light of various case-laws relied upon by the parties. We find that the AO relied on the judgement of Hon'ble Apex Court in support of his contention that the definition of "transfer" u/s.2(47) of the Act is merely inclusive and does not exhaust other kinds of transfer. The ratio laid down by the Hon'ble Apex Court, in this case, is not applicable as in the case of Sunil Siddharthbhai vs. CIT (156 ITR 509), the Hon'ble Apex Court held "When the assessee transferred his shares to the partnership-firm, he received no consideration within the meaning of section 48 of the Income-tax Act, 1961, nor did any profit or gain accrue to him for the purpose of section 45 of the Income-tax Act, 1961". The undisp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gh Court after examining all aspects answered the question against the Revenue. 4.3. The reliance was also placed on the decision of Hon'ble Delhi High Court rendered in the case of CIT vs. J.Dalmia reported at 149 ITR 215. The question before the Hon'ble Delhi High Court was whether, on the facts and in the circumstances of the case, the amount of Rs.1,02,500/- is assessable as capital gains other than long term capital gains in the hands of the assessee ?" The facts in that case were that M/s.Satish Kumar Sood & Sons were the owners of this property. They entered into an agreement to sell with one Krishan Prasad. There was a default of agreement and the dispute was referred to the Arbitral Tribunal. The arbitrator gave his award amounting to Rs.1,02,500/- "as damages for compensation for breach of the contract". In his income-tax return the assessee did not claim it as a capital gain. The ITO rejected his contention and the matter travelled upto the Tribunal and at the instance of the Revenue the Tribunal referred the aforesaid question of law for determination before the Hon'ble Delhi High Court. The Hon'ble Delhi High Court observed as under:- "We are to d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....circumstances of the case, the Tribunal misdirected itself in law in holding that a sum of Rs. 1 lakh received by the assessee as damages for non- performance of the agreement was a capital receipt not liable to capital gains tax ?" 4.6. The facts before the Hon'ble Calcutta High Court in the above case were that the contention of the Revenue that the sum of Rs. 1 lakh which was received out of a contract by way of liquidated damages was in the nature of a business transaction and it was thus a revenue receipt. It was agreed in the agreement itself that if the transaction could not be completed because of any fault on the part of the vendor, a specified amount of liquidated damages to the tune of Rs. 1 lakh is to be paid to the intending purchaser. The Hon'ble High Court decided both the questions in favour of assessee. 4.7. In the statement of facts, the Revenue has relied on the decision of Hon'ble Bombay High Court in the case of CIT vs. Tata Services Ltd. (1980) 122 ITR 594. We find that this decision of the Hon'ble Bombay High Court has been distinguished by the Hon'ble Jurisdictional High Court in the case of Baroda Cement and Chemicals Ltd. vs. CIT(....