TaxTMI 
TaxTMI 
2018 (9) TMI 1239
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.... gain treating as wrong claim. The Ld. CIT (A) has failed to properly consider the written submission filed by the appellant. II. Addition on account of exempt income claimed treating the same as business income- Rs. 2,47,03,600/- I. The Ld. CIT (A) has erred in law and on facts in confirming the addition of Rs. 2,47,03,500/- as made by the Ld. A.O while treating the exempt income as income from. business and profession. 2. The Ld. CIT (A) has erred in law and on facts in failing to properly consider appellant company's detailed written submission and various judicial pronouncements relied upon by the appellant company. 3. That the Ld. CIT (A) has failed to consider the fact that as per the decision of the Hon'ble Jurisdictional Gujarat High Court in the case of Baroda Cement & Chemicals Ltd vs CIT (1986) 53 CTR 260 (Guj) and other judicial pronouncements, "Right to sue" as per the provisions of section 6(e) of the Transfer of Property Act, is not a property and therefore it is not a "Capital Asset" and as a consequence, impugned receipt of Rs. 2,47,03,600/- received as compensation / damages for relinquishment of right to sue in the Cour....
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....he landlord, it has decided to sale the said land to other parties instead of continuing with development proposal of the said land as per the terms and conditions of the development agreement. Thus, quoted from the decision of Hon'ble Gujarat High Court in Baroda Cement & Chemicals Ltd. vs. CIT 158 ITR 636 (Guj) the only recourse available to the assessee company was to file a suit in the Courts of law for specific performance of preemptive right to purchase the land as per the development agreement. Such right to file a suit in the Courts of law for specific performance of preemptive right to purchase the land as per development agreement is nothing but a 'right to sue' and as per the provisions of Section 6(e) of the Transfer of the Property Act, 'right to sue' is not capable of being transferred. The learned AR pointed out that after the breach of development agreement, the only right survives for the assessee was right to sue the vendor. The learned AR canvassed that such 'right to sue' for damages is not an actionable claim and is not transferrable on account of embargo cast upon by Section 6(e) of the Transfer of Property Act. It was further contended that 'right to sue' ....
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....to include certain sum receivable in the nature of forgoing right in certain intangible properties as business income. However the present case also does not fall under s. 28(va) of the Act as receipt is not in the nature of activities specified therein. Elaborating further, the learned AR contended that the compensation amount received is in respect of relinquishment of assessee's 'right to sue' in a Court of law which right cannot be regarded as revenue receipt taxable as business income under s.28(va) of the Act. The provisions of Section 28(va) of the Act are very clear that the compensation received in lieu of 'right to sue' does not fall under these provisions. The learned AR accordingly submitted that the action of the AO and CIT(A) is opposed to be legal principles delineated in the judicial precedents and thus requires to be set aside and relief as requested in the grounds of appeal be allowed. 9. The learned DR on the other hand relied upon the orders of the AO & CIT(A). 10. We have carefully considered the rival submissions and perused the orders of the authorities below as well as the material referred to in terms of Rule 18(6) of the ITAT Rules, 1963 and also the....
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....ts transferability, the compensation/damages received by assessee is not assessable as capital gains. 10.2 The co-ordinate bench of ITAT, Ahmedabad in the case of Deputy CIT(A) vs. Shekhar G. Patel ITA No.1997/Ahd/2010 order dated 19.03.2014 relied upon on behalf of the assessee has made reference to host of judicial pronouncements including the decision of the Hon'ble Gujarat High Court in the case of Baroda Cement and Chemicals Ltd. (supra) and concluded the issue in faovur of assessee. The Co-ordinate bench highlighted the relevant part of the decision of the Hon'ble Gujarat High Court which is reproduced hereunder: "18. The assessee had undoubtedly a right to sue M/s K.C.P. Ltd. for damages for breach of contract. Instead of litigating in a Court of law, the parties arrived at a settlement whereunder compensation in the sum of Rs. 1,40,000 came to be paid in full and final satisfaction to the assessee. Counsel for the Revenue contends that the compromise/arrangement resulted in extinguishment of the assessee's right to sue for damages within the meaning of s. 2(47) of the Act. While accepting this contention the Tribunal has placed reliance on the decision of....
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....see was consideration for the transfer of a capital asset." 10.3 The Hon'ble Gujarat High Court in Baroda Cement (supra), in turn, referred to the concept of breach of contract as discussed by the Hon'ble Bombay High Court in the case of Iron and Hardware (India) Co. vs. Shamlal & Bros. AIR 1954 Bom 423 as under (p. 645 of 158 ITR): "10. Chagla, C.J., had an occasion to consider this aspect of the law in Iron and Hardware (India) Co. vs. Shamlal & Bros. AIR 1954 Bom 423. The learned Chief Justice observed as under(p. 425) : 'It is well settled that when there is a breach of contract, the only right that accrues to the person who complains of the breach is the right to file a suit for recovering damages. The breach of contract does not give rise to any debt and, therefore, it has been held that a right to recover assignable because it is not a chose-in-action. An actionable claim can be assigned, but in order that there should be an actionable claim there must be a debt in the sense of an existing obligation. But inasmuch as a breach of contract does not result in any existing obligation on the part of the person who commits the breach, the right to ....
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....is a breach of contract, the party who commits the breach does not eo instanti incur any pecuniary obligation, nor does the party complaining of the breach becomes entitled to a debt due from the other party. The only right which the party aggrieved by the breach of the contract has is the right to sue for damages. That is not an actionable claim and this position is made amply clear by the amendment in s. 6(e) of the Transfer of Property Act, which provides that a mere right to sue for damages cannot be transferred.' Quoting the statement of law enunciated by Chagla C.J., which is extracted earlier, the Supreme Court stated (p. 1273) : 'This statement in our view represents the correct legal position and has our full concurrence'. 12. It would seem well-settled from the above discussion that after there is a breach of contract for sale of goods, nothing is left in the injured party save the right to sue for damages or specific performance which cannot be transferred under s. 6(e) of the Transfer of Property Act since it is a mere right to sue and not an actionable claim." 10.4 In view of the above facts and in the light of plethora of case laws rel....