TaxTMI 
TaxTMI 
2014 (9) TMI 388
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....t Rs. 3.28 cr. after deducting the business advance of Rs. 22 lacs by observing as under: "However, it is apparent that the assessee company received the whole sum of Rs. 3.5 Crore as compensation in respect of a 'would be' business asset for which a business advance of Rs. 22 Lacs were already made in the year 1997. The said property, if acquired, would be treated as part of capital work-in-progress. Hence, the consideration received in lieu of the interest ín the said property amounting to Rs. 3.5 crores should be treated as a business receípt against which expenditure to the tune of Rs. 22 Lacs (paid as advance) is allowable. Accordingly, Rs. 3,28,00,000 (Rs.3,50,00,000 - Rs. 22,00,000) is being added to the total income of the assessee under the head of 'Income from Business' as undisclosed business receipts. Penalty proceedings u/s. 271(1)(c) of the Act has been initiated separately for furnishing inaccurate particulars of income." Aggrieved, assessee preferred appeal before CIT(A), who after considering the submissions of the assessee and the facts of the case held that the assessee has not acquired right over the land as there was no agree....
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....certain terms and conditions. Different proceedings took after MOU but approval for sale could not be obtained from the court, which could have entitled to Eastern Paper Mills to sale the property. Therefore, the MOU was not legally enforceable on the said Eastern Paper Mill Ltd nor assessee could have enforced specific performance for sale and/or development of the said property. However on petition by the said Eastern Paper Mill Ltd Hon'ble Calcutta High Court vide its order dated 17.1.2005 permitted the Eastern Paper Mills to sell the property and appoint receivers for sale of the same. The assessee filed application before Hon'ble Calcutta High Court for the orders, it recalled Single Judge's order vide dated 07.02. 2005. Thereafter, said Eastern Paper Mills entered into an agreement on 22.03.2006, with one Skylark India Ltd and Company court as per the said agreement, issued directions for payment of money to the creditors of Eastern Papers Mills Ltd. The Company Court vide its order dated 21st April 2006 gave permission for the sale of the property to the said Skylark India Ltd vide order on an application registered CA No. 249 of 2006. The said Skylark India Ltd.....
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....no right on any property by virtue of the MOU or by virtue of the agreement mentioned above. The property was duly sold under an order of the Single Bench of Calcutta High Court and at the time of sale of the property the Judgment of the Calcutta High Court was in existence and was binding on the parties. The assessee who wanted to have investment opportunity in the land for earning future income was deprived off such opportunity because of the various orders herein before mentioned. The litigations have been going on and in the meantime, said purchaser Amba High Rise, approached assessee for out of court settlement to withdraw the litigation and accordingly an agreement was entered into between assessee and one hand and Eastern Paper Mill, Amba High Rise, Skylark whereby assessee was given a compensation of Rs. 3,50,00,000/-. As per the said agreement assessee accepted above amount in full and final settlement of all the claims and demands against those persons. It was also mentioned in clause (2) of the agreement that a sum of Rs. 75 lakhs was being paid for releasing the right on the premises and Rs. 2.75 crores for the loss of right to develop the said premises. The said partie....
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.... present case, in our view, the Tribunal was right in arriving at a conclusion that it was a capital receipt. The reason is that as provided in article XVIII of the first agreement the assessee was having an option or right or lien, if the owner desired to transfer the hotel or lease all or part of the hotel to any other per- son, the same was required to be offered first to the assessee (operator) or its nominee. This right to exercise its option was given up by a supplementary agreement which was executed in September, 1975, between the receiver and the assessee. It was agreed that the receiver would be at liberty to sell or otherwise dispose of the said property at such price and on such terms as he may deem fit and was not under any obligation requiring the purchaser thereof to enter into any agreement with the operator (assessee) for the purpose of operating and managing the hotel or otherwise, and in its return, agreed consideration was as stated above in clause X. On the basis of the said agreement, the assessee has received the amount in question. The amount was received because the assessee had given up its right to purchase and/or to operate the property. Further it is lo....
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....fter analysing a number of cases, the court observed that the following satisfactory measure of consistency in the principle is disclosed (page 282): "Where on a consideration of the circumstances, payment is made to compensate a person for cancellation of a contract which does not affect the trading structure of his business, nor deprive him of what in substance is his source of income, termination of the contract being a normal inci- dent of the business, and such cancellation leaves him free to carry on his trade (freed from the contract terminated) the receipt is revenue : Where by the cancellation of an agency the trading structure of the assessee is impaired, or such cancellation results in loss of what may be regarded as the source of the assessee's income, the payment made to compensate for cancellation of the agency agreement is normally a capital receipt." The aforesaid principle is relied upon in the case of Karam Chand Thapar and Bros. [1971] 80 ITR 167 (SC). Considering the aforesaid prin- ciples laid down as per article XVIII of the principal agreement, the amount received by the assessee is for the consideration for giving up his right to purchase and/or to....