AI Drafter 
TaxTMI 
TaxTMI 
2020 (3) TMI 421
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....es leave to add/amend, alter and/or vary any of the grounds at the time or before hearing of this appeal. 4. The Appellant therefore prays that assessing officer may please be directed to hold that i. The surplus/ compensation received by the appellant on surrender of his rights in a property (booking rights in flat) may please be directed to be held as capital receipt ii. That consequential reliefs as per provisions of sec 54/54F may please be allowed." 3. Brief facts of the case are that the assessee is an individual and has made provisional booking of flat No. 5 situated on 12th Floor of building in "Satyam Residency" at Thane for a consideration of Rs. 30,58,640/-. Subsequently, booking of the flat was cancelled and the assessee got a sum of Rs. 15,66,000/- as compensation towards cancellation. Upon examining the documents in this regard the Assessing Officer was not satisfied. Hence, it was concluded that such provisional booking does not give rise to capital asset in the hands of the assessee. Hence, the said receipts were treated as 'income from other sources'. The assessee had claimed deduction u/s. 54 of the Act for making an investment in ....
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....ation over the capital gain and also claimed deduction under section 54 as the assessee claimed to have invested Rs. 34,00,000/- in acquisition of new residential plot. The Assessing Officer treated the additional amount/compensation as 'Income from Other Sources', consequently the benefit of section 54 was also denied. The ld. CIT(A) also confirmed the action of Assessing Officer by taking view that neither the conveyance-deed was executed nor the assessee has taken possession. The ld CIT(A) also concluded that the assessee has made a provisional booking as shown in the cancellation letter dated 25.07.2011. 7. Section 2(14) of the Act defines the word 'capital asset' mean 'property of any kind held by an assessee' whether or not connected with business or profession. The word 'transfer' in relation to a capital asset is defined under section 2(47) which include the sale, exchange or relinquishment of the asset or the extinguishment of any rights therein. In our view the word 'property', is a term of widest import and signifying every possible interest which a person can clearly hold or enjoy, it has been held so by Hon'ble Apex Court in Ahmed GM. A....
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.... It was noted that such allotment is final unless it is cancelled or the allottee withdraw from the scheme and such allotment would be cancelled only under exceptional circumstances. It was noted that the allottee gets title to the property on the issue of allotment letter and the payment of installments was only a follow-up action and taking the delivery of possession is only a formality. 5. This aspect was further clarified by the CBDT in its later circular No.672 dated 16th December, 1993. In such circular representations were made to the board that in cases of allotment of flats or houses by co-operative societies or other institutions whose schemes of allotment and consideration are similar to those of D.D.A., similar view should be taken as was done in the board circular dated 15th October, 1986. In the circular dated 16th December, 1993 the board clarified as under: "2. The Board has considered the matter and has decided that if the terms of the schemes of allotment and construction of flats/houses by the co-operative societies or other institutions are similar to those mentioned in para 2 of Board's Circular No.471, dated 15-10-1986, such case....
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.... the parties and it does not of itself create any interest in or charge on such property. Section 40 of the Transfer of Property Act states that where a third person is entitled to the benefit of an obligation arising out of contract annexed to the ownership of immovable property, but not amounting to an interest therein or easement thereon, such right or obligation may be enforced against a transferee with notice thereof or a gratuitous transferee of the property affected thereby, but not against a transferee for consideration without notice of the right or obligation nor against such property in his hands. The illustration to section 40 reads, thus: "A, contracts to sell Sultanpur to B. While the contract is still in force he sells Sultanpur to C, who has notice of the contract. B may enforce the contract against C to the same extent as against A." 5. In the case of Ram Baran Prasad v. Ram Mohit Hazra AIR 1967 SC 744, the Supreme Court held that it was manifest that a contract for the sale of immovable property did not create any interest in the immovable property. In Soni Lalji Jetha v. Soni Kalidas Davchand AIR 1967 SC 978, the Supreme Court came to the conclu....
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....ide definition of 'capital asset' in the Act. It also held that the earnest money paid by the assessee to A was the consideration for which the property under the agreement had been acquired. 7. The decision in the case of Tata Services Ltd. (supra) was followed by this Court in CIT v. Sterling Investment Corpn. Ltd. [1980] 123 ITR 441. This was a case where the assessee had entered into an agreement to purchase immovable property and had paid earnest money. Matters dragged on. Ultimately, an agreement was reached and only the sum of Rs. 10,000 was returned to the assessee. The assessee claimed before the tax authorities that it had lost the balance of the earnest money that it had paid and that this was a capital loss. This Court was called upon on reference, to decide whether this was correct. It considered the definition of 'capital asset' under the Act and held that the contractual right of the purchaser to obtain title to immovable property for a price, which right was assignable, had to be considered to be 'property' and, therefore, a 'capital asset'. In this behalf reference was made to the judgment in the case of Tata Servic....
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....ise of the right to have the conveyance executed in the name of a nominee, the assessee was nominated. The assessee was constrained to file a suit against the contractors for an injunction against selling the property to third parties and he obtained an injunction. When the suit reached hearing, parties agreed to go to arbitration and the assessee gave up his claim for specific performance of the agreement and retained his right to claim damages. The arbitrator awarded damages to the tune of Rs. 1,02,500. The question before the Court was whether the amount of Rs. 1,02,500 could be assessed to tax as a capital gain. The Delhi High Court noted the judgment of this Court in the case of Tata Services Ltd. (supra) and distinguished it on facts. The Court said that in the case before it, it had to determine whether the damages received by the assessee were in respect of a capital asset. There was a breach of contract and the assessee received damages in satisfaction thereof. He had a mere right to sue for damages. Assuming the same to be property it could not be transferred under section 6(e) of the Transfer of Property Act. 10. Having regard to the statutory provision....
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....ce, that the settlement could not be treated as being in the ordinary course of the business of the assessee and that there had been a sterilisation of the assessee's capital assets in that the English company had not erected the plant according to stipulation. The decision was, therefore, rendered upon the particular facts of that case, which are not akin to the facts before us. 12. In CIT v. Ashoka Marketing Ltd. [1987] 164 ITR 664, the Calcutta High Court held upon the facts that there had been no element of cost in the acquisition for which the sum of Rs. 1 lakh was paid as liquidated damages under an agreement to purchase property. In CIT v. Dhanraj Dugar [1982] 137ITR 350, the facts before the Calcutta High Court were unusual. The assessee was a broker of immovable property. He entered into an agreement with three other persons for the purchase of an immovable property which was to be developed and resold. The assessee was not to pay any part of its purchase price. There were disputes between the four persons and the assessee filed a suit claiming partition. Upon a settlement the assessee received Rs. 1 lakh. The question was whether the sum of ....
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....e assessee." 10. Considering the decision of jurisdictional High Court as referred above, we are of the view that the assessee on booking acquired a right in the asset on 10.04.2007. The asset/interest in asset/ flat was surrendered in 25th July 2011, therefore, the assessee retained right in the asset for more than 36 month, therefore, the assessee was qualified for claiming LTCG on cancellation/surrender of such asset and the compensation so received is qualified for LTCG. 11. The case law relied by ld. DR for the revenue in case of Shobha jain Vs CIT (supra) in our view is not applicable on this grounds of appeal. The facts of this case are entirely based on different facts. In the said case, the dispute was with regard to disallowance under section 54F. The assessing officer disallowed the exemption holding that it is permissible only in respect of residential house is purchased or constructed within the stipulated period. The assessee has shown agreement for purchase of land. And the assessee failed to show that there was transfer of property by execution of sale deed. The Tribunal recorded a clear finding that there was no sale of property ....