TaxTMI 
TaxTMI 
2019 (8) TMI 768
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....g the addition of Rs. 9,00,00,000/- by ignoring the fact that this amount is closely linked to the transaction and is not an independent term. The assessee upon receipt of notice of hearing, has filed crossobjections which is in support of the impugned order. 2.1 Facts in brief are that the assessee being resident individual, a lawyer by profession, was assessed for year under consideration u/s 143(3) of the Act on 28.03.2015, wherein the income of the assessee was determined at Rs. 939.87 Lakhs after certain additions as against returned income of Rs. 39.87 Lakhs e-filed by the assessee on 30.08.2012. As evident from grounds of appeal, the sole subject matter of present appeal before us is the nature of compensation of Rs. 900 Lakhs received by the assessee during impugned AY pursuant to certain consent terms as approved by Hon'ble Supreme Court. 2.2 During assessment proceedings, it transpired that the assessee had sold a plot at Gaoli, Village Gundavalli, Andheri (E), Mumbai on 31.12.2011 for a sale consideration of Rs. 4 Crores. The indexed cost of plot was taken at Rs. 66.02 lakhs. The assessee invested Rs. 250.62 lakhs in a new residential flat and further Rs. 50 lakhs in ....
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....n terms of the decision of Hon'ble Supreme Court rendered in CIT V/s B.C.Srinivasa Shetty [128 ITR 294]. 3.2 The Learned CIT(A), after due consideration of factual matrix and assessee's submissions concurred with the same and allowed the claim by observing as under: - 6.3. HELD: I have carefully considered the impugned assessment order, written submission of the appellant and remand report. The moot question need to be addressed is the nature of receipt of compensation of Rs. 9 Crores received by the appellant on account of time and effort and cost put in by him alone in the Court of Law and further warding off of his right to sue at any forum/authority/court of law. At the outset, it is apparent from the assessment order that this issue has not been addressed at all. The AO has mechanically considered this amount as part of sale consideration. 6.4 it is pertinent to glimpse of chronology of events that lead to present situation of the instant case, may instant issue at hand. In 1969 Appellant's father wanted to develop the aforesaid properties but could not get plan approved from Bombay Municipal Corporation, as property was reserved for Public Purpose. In 1973, property was ....
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....4344 of 2003 - 11. Supreme court SLP No.5999 of 2006 12. Supreme court SLP No.6735 of 2006 13. Supreme court SLP No. 19344 of 2006 14. Criminal Contempt Petition No. 1 of 2007 15. Criminal contempt Petition 2 of 2007 16. N/M No..256 of 2007 in BCC Suit No.4109/1980 17. N/M A/o.257 of 2007 in BCC Suit No.4109/1980 18. N/M A/o.258 0/2007 in BCC Suit No.4109/1980 19. N/M No. 833 of 2007 in BCC Suit No.4109/1980 20. Supreme court SLP No. 25501 of 2008 21. Supreme court SLP No.2758 of 2010 22. Supreme court SLP No.2749 of 2010 23. Contempt Petition No 31 of 2010 24. High court Suit No.870 of 2010 (Rs. 100 Crore Claim by Akruti City Ltd against Assess for defamation) 25. Criminal Writ Petition No. 1977 of 2010 26. Supreme court SLP No.35188 of 2010 27. Supreme court SLP No.35441 of 2010. 28. Supreme court SLP No.445 of 2011. 29. Supreme Court SLP No.446 of 2011 30. Supreme court SLP No. 80 of 2011 31. Supreme court SLP No. 81 of 2011 6.5. It is pertinent to note that all these single-handed efforts of the appellant over a long period of time seems to be very rare and unique fact. Such efforts have culminated to amicable resolution of the disput....
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....ver a decade to challenge the acquisition of the suit properties. The above consent terms have also been approved by the Hon'ble Supreme Court by holding that "In view of the above development, the LA. is allowed, the consent terms - Annexure I, are taken on record and the Special Leave Petitions are disposed of in terms of the settlement arrived at between the parties." These facts clearly establish that the Hon'ble Supreme Court has duly approved that the Appellant must receive Rs. 4,00,00,000/- as consideration for sale of property and Rs. 9,00,00,000/- for time and effort put in by him over decades in challenging the acquisition of suit properties. This claim is special to the appellant as per para 5 of the Consent Terms. 6.6 On careful perusal of Consent Terms and the Conveyance Deed it clear that by agreeing into these terms and conditions the appellant along with other petitioners have unconditionally withdraw all the claims in or arising out of all the petitions at various forums be it the Supreme Court, the High Court, Maharashtra Govt. or various other authorities like the Slum Rehabilitation Authority, Corporation, Environmental Authorities, and Police Author....
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.... in the assessment order. He has simply treated the compensation as part of Sale Consideration. 6.7. Let us visit various provisions of the Income Tax Act, 1961 and of Transfer of Property Act 1882. 6.7.1. Section 2 (14) defines Capital Asset as under: Capital asset means property of any kind held by an assessee..... {Explanation:- For the removal of doubts, it is clarified that property includes and shall be deemed to have included any rights in or in relations to an Indian company,, including rights of Management or control or any other rights whatsoever,} Further Section 2(24) provides as under: "(24) "income" includes- (vi) any capital gains chargeable under section 45" 6.7.2. Section 2 (47) defines transfer as under: "transfer", in relation to a capital asset. includes,- (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or Explanation 2.-For the removal of doubts, it is hereby clarified that "transfer" includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirect....
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....l be deemed to be income chargeable under the head "Capital gains" of the previous year in which the final order of such court, Tribunal or other authority is made; (c) where in the assessment for any year, the capital gain arising from the transfer of a capital asset is computed by taking the compensation or consideration referred to in clause (a) or, as the case may be, enhanced compensation or consideration referred to in clause (b), and subsequently such compensation or consideration is reduced by any court, Tribunal or other authority, such assessed capital gain of that year shall be recomputed by taking the compensation or consideration as so reduced by such court, Tribunal or other authority to be the full value of the consideration. Explanation.-For the purposes of this sub-section,- (i) in relation to the amount referred to in clause (b the cost of acquisition and the cost of improvement shall be taken to be nil: (//) the provisions of this sub-section shall apply also in a case where the transfer took place prior to the 1st day of April, 1988; (//'/) where by reason of the death of the person who made the transfer, or for any other reason, the enhanced com....
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....ding off of his right to sue at any forum/authority/court of law can be treated as capital gains in the hands of appellant. Section 2(24) of the Act specifically includes "(vi) any capital gains chargeable under section 45" within the ambit of income. Thus, a capital receipts would be chargeable to tax only if it falls under section 45 of the Act (as capital gains) though capital receipt as such is not taxable. This principle was described by the Income Tax Appellate Tribunal (Mumbai) in Dhruv A. Shah v. Commissioner of Income Tax [20041 88 ITD 118 as follows: "Further, all receipts are not taxable under the Income Tax Act. Section 2(24) defines "income". It is no doubt that this is an inclusive definition. However, a capital receipt is not income under section 2(24^ unless it is chargeable to tax as capital gain under section 45. It is for that reason that under section 2(24) (vi), the Legislature has expressly stated, inter alia, that income shall include capital gain chargeable under section 45. Under section 2(24) (vi), the Legislature has not included all capital gains as income. It is only capital gain chargeable under section 45 which has been treated as income under secti....
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.... already stated, the only right which the present appellant has is the right to go to court of law and recover damages of acquisition of property. Now, damages are the compensation which a court of law gives to a party for the injury which he has sustained over the year. Here, the Apex Court has agreed that the Cost of Sale of Property is Rs. 4 crore and additional compensation in the form of damages of Rs. 9Crore has been given to the appellant alone for time, effort, and cost incurred by him over the years for being engaged in litigation in order to get justice. He gets compensation as a result of the fiat of the court. Therefore, no pecuniary liability arises till the court has determined that the party complaining of the breach is entitled to compensation/damages. Therefore, when compensation/damages are assessed, it would not be true to say that what the court is doing is ascertaining a pecuniary liability which already existed. The court in the first place must decide that the defendant is liable and then it proceeds to assess what that liability is. But till that determination, there is no liability at all upon the defendant. In view of above, the "right to sue" can be consi....
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....of Income-tax, Central Circle-2, Jaipur, [2015] 57 taxmann.com 194 (Jaipur - Trib.) has held as under: "2.19 Assessee has vehemently denied having anywhere admitted that part of the compensation was for non-competition. In our considered view, the compensation in question was meant, intended and paid for withdrawal of aforesaid litigation instituted by assessee which could have resulted in many adverse consequences for the reputation of Coca Cola/Atlantic besides entailing huge cost and efforts of litigation. Relinquishment of right to sue is neither a capital asset nor taxable u/s 28 which provides specific types of receipt to be held taxable as business income. Relinquishment of right to sue does not find any mention therein. In this eventuality, we have no hesitation to hold that the impugned amount of Rs. 8,16,22,040/- is a capital receipt not liable to Income Tax. The addition is deleted, assessee's grounds in this behalf are allowed." Meaning thereby that relinquishment of "right to sue" is neither a capital asset nor taxable under section 28 of the Act and receipt of any sum against relinquishment is a capital receipt. Further, Authority for Advance Rulings held in the....
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....arties can be accepted by it. Once it is accepted and an order or decree is passed in terms thereof, then, it is an order of the Court. Thus, the Apex Court has not undertaken any mechanical exercise or has not casually and lightly accepted the terms and approved the same. It has performed a conscious act and in terms of Order in the four corners of law of the land. There cannot be any transfer of a "right to sue" under Indian Law and any capital receipt arising from a right to sue cannot thus be considered capital gains under section 45 of the Act. It is amply clear that when the cost of acquisition of the capital receipts are indeterminable, the computation provision of Section 48 of the Act fails and consequently, the charging provision of Section 45 of the Act also fails. Further, relinquishment of "right to sue" is neither a capital asset nor taxable under section 28 of the Act and receipt of any sum against relinquishment is a capital receipt. Furthermore, the income in the nature of settlement amount in lieu of surrender of 'right to sue' is not covered in section 56 (1) of the Act. Therefore, the question of treating the same as income from other sources would not a....