TaxTMI 
TaxTMI 
2018 (11) TMI 125
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....td. Pursuant to court order and on being asked, the following calculation was furnished for the loss: "Cordell Estates P. Ltd. Advance for residential apartment paid in FY 1994-95 50,00,000/- Receipts in 2010-11 pursuant to court order 1,20,00,000/- Indexed cost (711/259) 1,37,25,869/- (17,25,869/-)" 3. Case of the assessee is that the assessee being interested in buying one residential flat at Bangalore, entered into the construction agreement dated 7.10.1994 with M/s Cordell Estate (P) Ltd. and made an advance payment of Rs. 50 lacs. The said agreement provides for deduction of a penalty interest at 24% p.a. on the total amount paid in case the seller fails or neglects to handover possession of the property as stipulated in the agreement. The seller never honoured the obligation under the contract, hence, the assessee had to file a suit for recovery of the advance amount of Rs. 50 lacs with ante latem interest at Rs. 86,65,773/- . the said suit was decreed for such amount with pendent latum and post latum interest @ 24% on the principal amount of Rs. 50 lacs which the assessee calculated at Rs. 1,37,25,869/-. The seller approached the Hon'ble High Court ag....
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....re of interest and thereby sustaining the addition to the tune of Rs. 70 lacs. According to the assessee, whatever the amount that was received by the assessee under the settlement with the seller for cancellation of the agreement or for relinquishment of rights to purchase the capital assets, as such, such amount assumes the character of capital receipt and in the absence of any capital gain, such capital receipt is not liable to tax; whereas challenging the relief granted by the learned CIT(A) to the assessee in restricting the addition to Rs. 70 lacs, Revenue preferred ITA No.5884/Del/2015 stating that the voluntary waiver of the income amounts to diversion of income, as such, the learned AO was justified in bringing it to tax. Learned CIT(A) committed an error in deleting the same. Since the issues involved in both the appeals is in respect of the nature of receipt in the hands of the assessee, we deem it just and proper to answer this issue by way of this common order. 8. On a careful consideration of the record and the arguments on either side, we are convinced that in so far as the facts are concerned, absolutely there is no dispute. The entire dispute in this matter revolv....
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....he assessee, the assessee received an amount awarded as damages by the arbitrator, was referred to the Hon'ble High Court of Delhi. Hon'ble Delhi High Court answered the same in favour of the assessee. SLP preferred by the Revenue against such judgment was dismissed by the Hon'ble Supreme Court in SLP(Civil) No.17158 of 1985 (CIT vs J. Dalmia, 189 ITR (St.) 122). 12. In the case in hand also Clause 3 of the agreement which entitles the purchaser to deduct penalty by way of interest at 24% p.a. for the period of delay if any in handing over the possession of the apartment to the assessee if such apartment is not handed over to the assessee as per the time schedule agreed upon by the parties. This clause clearly shows that the benefit that shall ensure to the assessee, though calculated by way of interest at 24% p.a. but in fact was intended to be by way of reduction of the price of the capital asset. No doubt, in this matter the apartment intended to be purchased by the assessee is a capital asset in any case, the assessee does not deal in real estate nor could such apartment be stock in as trade. When there is a clear intention on the part of the parties that the performance or no....
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....e Hon'ble Apex Court held that the Income-tact Act takes into account two points of time at which the liability to tax is attracted viz. the accrual of income or its receipt, but the substance of the matter is the "income". If income does not result at all, there can be no tax even though it is possible to reach a hypothetical income which was never materialized. Further in CIT vs Govind Agencies (P) Ltd. (2007) 295 ITR 290 (All), it was held that the earning of income whether actual or notional, has to be seen from the view point of prudent assessee and if in a given circumstance, the assessee decides to forego any income on justifiable grounds, there does not arise any question of bringing to tax any such notional income. The real income theory stated in the case of State Bank of Travancore vs. CIT, 158 ITR 102, 154 (SC), is that whether an accrual has taken place or not has to be judged in appropriate cases on the principle of real income. In view of the settled proposition of law, what has to be seen is that whether the assessee had foregone any income for justifiable reasons as a prudent man or not. 17. Learned CIT(A) in the impugned order recorded that after having lost the ....